Our current mortgage system has broken down because the originators of mortgages have not retained any part of the credit risk. They are motivated to maximize their fee income. As agents, their interests
are not identical with the interests of the ultimate owners.
In the Danish system, the service companies retain the credit
risk--they have to replace the mortgages that are in default.
In contrast to our reliance on government sponsored
enterprises (GSEs)--namely Fannie Mae and Freddie Mac--
the Danish is an open system in which all mortgage originators
participate on equal terms, and it operates without government
guarantees. Yet Danish mortgage bonds are traditionally very
highly rated; often they yield less than government bonds.
This could not be replicated in the United States at present
because of the demoralized state of the market, but it may be
achieved later. Danish mortgage bonds are highly standardized, and their distinguishing feature is that they are identical to and interchangeable with the underlying mortgages.
House owners can redeem their mortgages at any time by purchasing t
the equivalent mortgage bond in the market and exchanging it
for the mortgage. Since bond prices and house prices normally
move in the same direction, this feature--called the
principle of balance--reduces the chances of householders
having negative equity in their houses.
The mortgage originators are strictly regulated, and their interests are closely aligned with those of the bondholders. They pass on only the interest rate risk to bondholders, retaining the credit risk. That is why the bonds are so highly rated. The U.S.Treasury has supported this plan in certain situations.
Showing posts with label How to make a RECESSION PAINLESS. Show all posts
Showing posts with label How to make a RECESSION PAINLESS. Show all posts
Wednesday, March 4, 2009
Thursday, February 19, 2009
CAN WE LEARN FROM JAPAN'S ECONOMIC STMULUS
The facts Behind the NEWS
From 1991 thru 2008 Japan had a gov’t stimulus program. The US economy is not identical to the Japanese but there are similarities. The US is roughly twice as large an economy as Japan. Experts in Japan and the US believe Japan spent too much money on infrastructure and not enough on education and social services which create more jobs per $ spent than infrastructure. JAPANESE STATISTICS: every yen spent on infrastructure added 1.37 yen, 1.6 yen for social services like care for the elderly, pension payments, 1.74 for schools and education. However money spent on infrastructure does put people to work and thus may help prevent a depression or total collapse. These figures are from The Japanese Institute of Local Government, a non-profit policy research group.
The stimulus worked best from 1991 to 1995 when Japan spent two trillion dollars for a 3% rise in Japanese GNP. An equivalent effort for the US would be four trillion dollars, Our present stimulus plan is only $780 billion.
The experts believed in a quick massive stimulus with a follow-up at a lower level for some time, till recovery takes root. Japanese experts thought that the stimulus was cut back in 1995 to a lower level too soon. Some experts thought that this is what happened to FDR in the US causing the 1937 recession. To be effective the stimulus must be kept going for some time. The Japanese stimulus was started up again but at a lower level than the original start. The second stimulus start showed little effect though it was continued for 10 years.
Japan’s economy did grow from 2003 to 2007. Japanese experts think that what helped the Japanese economy the most was the gradual rebuilding of private balance sheets and banks liquidity, and increased exports to China and the US. Japan experts strongly recommended projects that would be helpful fora number of years. They emphasized transparent decisions based on economics not politics.
From 1991 thru 2008 Japan had a gov’t stimulus program. The US economy is not identical to the Japanese but there are similarities. The US is roughly twice as large an economy as Japan. Experts in Japan and the US believe Japan spent too much money on infrastructure and not enough on education and social services which create more jobs per $ spent than infrastructure. JAPANESE STATISTICS: every yen spent on infrastructure added 1.37 yen, 1.6 yen for social services like care for the elderly, pension payments, 1.74 for schools and education. However money spent on infrastructure does put people to work and thus may help prevent a depression or total collapse. These figures are from The Japanese Institute of Local Government, a non-profit policy research group.
The stimulus worked best from 1991 to 1995 when Japan spent two trillion dollars for a 3% rise in Japanese GNP. An equivalent effort for the US would be four trillion dollars, Our present stimulus plan is only $780 billion.
The experts believed in a quick massive stimulus with a follow-up at a lower level for some time, till recovery takes root. Japanese experts thought that the stimulus was cut back in 1995 to a lower level too soon. Some experts thought that this is what happened to FDR in the US causing the 1937 recession. To be effective the stimulus must be kept going for some time. The Japanese stimulus was started up again but at a lower level than the original start. The second stimulus start showed little effect though it was continued for 10 years.
Japan’s economy did grow from 2003 to 2007. Japanese experts think that what helped the Japanese economy the most was the gradual rebuilding of private balance sheets and banks liquidity, and increased exports to China and the US. Japan experts strongly recommended projects that would be helpful fora number of years. They emphasized transparent decisions based on economics not politics.
Friday, February 6, 2009
WHY AN ECONOMIC STRATEGY III
GET THE FACTS BEHIND THE NEWS
Elizabeth Warren head of the oversight panel setup by Congress to monitor the Federal Bailout says, “THE GOV’T STILL DOES NOT SEEM TO HAVE A COHERENT STRATEGY FOR EASING THE FINANCIAL CRISIS.“ Instead the gov’t seemed to be lurching from one tactic to the next without clarifying how each step fits into the overall plan. .
One of the reasons for Ms. Warren’s observation is the US does not have an economic strategy. Yogi Berra a modern day philosopher has observed. “If you don’t know where you are going you may not get there. “
Why does Prof Porter, Harvard School of Business Professor, believe what has driven our success is starting to erode?
There are probably several reasons. Two reasons that are part of the sme problem stand out.
1) As Prof Porter notes the American political system has evolved with piecemeal reactions to current events. The means that the effect of a decision, or the cumulative effect of several decisions from various parts of our economy or political system are not examined for their effect on the whole system. The effects on the whole could be bad, good, negligible.
2) Decisions made for the purpose of changing the economic system, such a tariffs, anti-trust laws, oversight provisions etc. frequently take into account the immediate industry or situation rather than considering the overall and long run effects.
The US needs an economic strategy. More later.
Elizabeth Warren head of the oversight panel setup by Congress to monitor the Federal Bailout says, “THE GOV’T STILL DOES NOT SEEM TO HAVE A COHERENT STRATEGY FOR EASING THE FINANCIAL CRISIS.“ Instead the gov’t seemed to be lurching from one tactic to the next without clarifying how each step fits into the overall plan. .
One of the reasons for Ms. Warren’s observation is the US does not have an economic strategy. Yogi Berra a modern day philosopher has observed. “If you don’t know where you are going you may not get there. “
Why does Prof Porter, Harvard School of Business Professor, believe what has driven our success is starting to erode?
There are probably several reasons. Two reasons that are part of the sme problem stand out.
1) As Prof Porter notes the American political system has evolved with piecemeal reactions to current events. The means that the effect of a decision, or the cumulative effect of several decisions from various parts of our economy or political system are not examined for their effect on the whole system. The effects on the whole could be bad, good, negligible.
2) Decisions made for the purpose of changing the economic system, such a tariffs, anti-trust laws, oversight provisions etc. frequently take into account the immediate industry or situation rather than considering the overall and long run effects.
The US needs an economic strategy. More later.
Tuesday, January 27, 2009
To Achieve Prosperity and growth
GET THE FACTS BEHIND THE NEWS
Professor Michael Porter distinguished Harvard Business School Professor has written in the Nov. 10 issue of Business Week an article explaining why he believes the economic advantages of the US are eroding and why the development of an economic strategy is critical.
Prof Porter states” a series of policy failures and have offset and even nullified “US “ strengths just as other nations are becoming more competitive”. Let’s have a look at some MORE of the economic areas that worry Prof Porter.
5) The US is energy inefficient. Public policies fail to promote energy conservation.
6) “Trade and foreign investment are fundamental to the success of the US economy but the US has lost its focus and credibility in shaping the international trading system.” “With no strategy the US has failed to work with other advanced countries to assist poorer countries to feel confident about opening markets and internal reform.” “Our foreign aid is still tied to the purchase of US goods rather than the actual needs of countries.”
7) “The federal gov’t has failed to recognize and support the decentralization and regional specialization that drives our economy.
8) Lack of regulatory oversight combined with lack of a strategic plan has resulted in a hodge-podge of policies that have driven up the costs of doing business. TO SUM UP WE HAVE HAD POOR ECONOMIC MANAGEMENT.
9) Is good strategic economic plan possible considering our political system?
It requires political parties and private leaders to come together and chart a long term plan. Prof Porter recommends a bipartisan joint planning group to coordinate priorities,
What political problems does our present depression present?
Professor Michael Porter distinguished Harvard Business School Professor has written in the Nov. 10 issue of Business Week an article explaining why he believes the economic advantages of the US are eroding and why the development of an economic strategy is critical.
Prof Porter states” a series of policy failures and have offset and even nullified “US “ strengths just as other nations are becoming more competitive”. Let’s have a look at some MORE of the economic areas that worry Prof Porter.
5) The US is energy inefficient. Public policies fail to promote energy conservation.
6) “Trade and foreign investment are fundamental to the success of the US economy but the US has lost its focus and credibility in shaping the international trading system.” “With no strategy the US has failed to work with other advanced countries to assist poorer countries to feel confident about opening markets and internal reform.” “Our foreign aid is still tied to the purchase of US goods rather than the actual needs of countries.”
7) “The federal gov’t has failed to recognize and support the decentralization and regional specialization that drives our economy.
8) Lack of regulatory oversight combined with lack of a strategic plan has resulted in a hodge-podge of policies that have driven up the costs of doing business. TO SUM UP WE HAVE HAD POOR ECONOMIC MANAGEMENT.
9) Is good strategic economic plan possible considering our political system?
It requires political parties and private leaders to come together and chart a long term plan. Prof Porter recommends a bipartisan joint planning group to coordinate priorities,
What political problems does our present depression present?
Sunday, January 18, 2009
What economic challeges for Prosperity, Growth
GET THE FACTS BEHIND THE NEWS
Professor Michael Porter distinguished Harvard Business School Professor has written in the Nov. 10 issue of Business Week an article explaining why he believes the economic advantages of the US are eroding and why the development of a economic strategy is critical.
Prof Porter states” a series of policy failures and have offset and even nullified “US “ strengths just as other nations are becoming more competitive”. Let’s have a look at some of the economic areas that worry Prof Porter.
1) “An inadequate rate of reinvestment in science and technology is hampering our feeder system for entrepreneurship. Research and development as a share of the GDP has declined, while it has risen in other countries”. This is well recognized but policy makers have failed to act.
2) Our belief in competition is waning. “A creeping relaxation of antitrust enforcement has allowed mergers to dominate markets”. “We are seeing more interference in competition with protectionism and favoritism.”
3) US colleges and universities do not have a serious plan, such as GI Bill or National Science Foundation programs, to improve access to them. The US now ranks 12th in educational attainment for 25 to 34year olds. For 30 yrs we have not improved ourselves in this area. This is an “ominous trend in an economy that must have the skills to justify our high wages.”
4) At a time when job insecurity and turnover are high the US gov’t has not taken responsibility to provide a transition safety net for US working people. The job training system is ineffective and receives less funding each year. Pension security is declining. Social security is not being adjusted and strengthened. Access to affordable health insurance is a major worry to most people. The gov’t could equalize the tax deductibility of individuals purchasing insurance to assist those not covered by employers, but has failed to do so.
More problem areas on our next blog. Please note so far no mention of “Kick Starts”, economic stimulus’s, or bank liquidity. For Prof Porter’s views of our economic advantages please see Blog, “Why an Economic Strategy.
Where does the US really stand? Prof Porter says the US has prospered because of unique competitive strengths. 1) The US has an unparalleled environment for entrepreneurship and starting new companies. 2) US Entrepreneurship has been fed by a science, technology, and innovation that is by far the best in the world. 3) The US has the world’s best institutions of higher learning. 4)The US has been the cuntry with the strongest commitment to competition and free markets. 5)The task of forming economic policy and putting it into practice is highly decentralized across states and regions. This decentralization maybe the US greatest competitive strength. 6) The US benefits from the most efficient capital markets of any nation. This especially true of risk capital. 7)The US has remarkable dynamism and resilience to take losses and move on.
Professor Michael Porter distinguished Harvard Business School Professor has written in the Nov. 10 issue of Business Week an article explaining why he believes the economic advantages of the US are eroding and why the development of a economic strategy is critical.
Prof Porter states” a series of policy failures and have offset and even nullified “US “ strengths just as other nations are becoming more competitive”. Let’s have a look at some of the economic areas that worry Prof Porter.
1) “An inadequate rate of reinvestment in science and technology is hampering our feeder system for entrepreneurship. Research and development as a share of the GDP has declined, while it has risen in other countries”. This is well recognized but policy makers have failed to act.
2) Our belief in competition is waning. “A creeping relaxation of antitrust enforcement has allowed mergers to dominate markets”. “We are seeing more interference in competition with protectionism and favoritism.”
3) US colleges and universities do not have a serious plan, such as GI Bill or National Science Foundation programs, to improve access to them. The US now ranks 12th in educational attainment for 25 to 34year olds. For 30 yrs we have not improved ourselves in this area. This is an “ominous trend in an economy that must have the skills to justify our high wages.”
4) At a time when job insecurity and turnover are high the US gov’t has not taken responsibility to provide a transition safety net for US working people. The job training system is ineffective and receives less funding each year. Pension security is declining. Social security is not being adjusted and strengthened. Access to affordable health insurance is a major worry to most people. The gov’t could equalize the tax deductibility of individuals purchasing insurance to assist those not covered by employers, but has failed to do so.
More problem areas on our next blog. Please note so far no mention of “Kick Starts”, economic stimulus’s, or bank liquidity. For Prof Porter’s views of our economic advantages please see Blog, “Why an Economic Strategy.
Where does the US really stand? Prof Porter says the US has prospered because of unique competitive strengths. 1) The US has an unparalleled environment for entrepreneurship and starting new companies. 2) US Entrepreneurship has been fed by a science, technology, and innovation that is by far the best in the world. 3) The US has the world’s best institutions of higher learning. 4)The US has been the cuntry with the strongest commitment to competition and free markets. 5)The task of forming economic policy and putting it into practice is highly decentralized across states and regions. This decentralization maybe the US greatest competitive strength. 6) The US benefits from the most efficient capital markets of any nation. This especially true of risk capital. 7)The US has remarkable dynamism and resilience to take losses and move on.
Monday, January 12, 2009
WHY AN ECONOMIC STRATEGY II
GET THE FACTS BEHIND THE NEWS
With the many advantages of the US economic system, listed in ourlast blog, why does Prof Porter believe what has driven our success is starting to erode?
There are probably several reasons. Two reasons that are part of the sme problem stand out.
1) As Prof Porter notes the American political system has evolved with piecemeal reactions to current events. The means that the effect of a decision, or the cumulative effect of several decisions from various parts of our economy or political system are not examined for their effect on the whole system.
2) Decisions made for the purpose of changing the economic system, such a tariffs, anti-trust laws, oversight provisions etc.frequently ONLY take into account the immediate industry or situation rather than considering the overall and long run situation.
This is why the US needs an economic strategy.
Prof Porter does not discuss the Who and Where the strategy would formulated, approved, and maintained. Assuming that we can not expect the general public to be informed and maintain continues interest in such a project the actual work would have to be carried out by a commission, gov’t agency, or respected public organization. It would be very important to have transparency and frequent opportunities for suggestions and discussions.
Next blog we discuss some economic areas that worry Prof Porter.
With the many advantages of the US economic system, listed in ourlast blog, why does Prof Porter believe what has driven our success is starting to erode?
There are probably several reasons. Two reasons that are part of the sme problem stand out.
1) As Prof Porter notes the American political system has evolved with piecemeal reactions to current events. The means that the effect of a decision, or the cumulative effect of several decisions from various parts of our economy or political system are not examined for their effect on the whole system.
2) Decisions made for the purpose of changing the economic system, such a tariffs, anti-trust laws, oversight provisions etc.frequently ONLY take into account the immediate industry or situation rather than considering the overall and long run situation.
This is why the US needs an economic strategy.
Prof Porter does not discuss the Who and Where the strategy would formulated, approved, and maintained. Assuming that we can not expect the general public to be informed and maintain continues interest in such a project the actual work would have to be carried out by a commission, gov’t agency, or respected public organization. It would be very important to have transparency and frequent opportunities for suggestions and discussions.
Next blog we discuss some economic areas that worry Prof Porter.
Saturday, January 10, 2009
WHY AN ECONOMIC STRATEGY
GET THE FACTS BEHIND THE NEWS
Elizabeth Warren head of the oversight panel setup by Congress to monitor the Federal Bailout says, “THE GOV’T STILL DOES NOT SEEM TO HAVE A COHERENT STRATEGY FOR EASING THE FINANCIAL CRISIS. “ Instead the gov’t seemed to be lurching from one tactic to the next without clarifying how each step fits into the overall plan. The overall impression is one of confusion by a leadership(?) that does not know what it is doing.
One of the reasons for Ms. Warren’s observation is the US does not have an economic strategy. As Yogi Berra a modern day philosopher has observed. “If you don’t know where you are going you may not get there.“
Professor Michael Porter distinguished Harvard Business School Professor has written in the Nov. 10 issue of Business Week an article explaining why he believes the development of a economic strategy is critical.
Professor Porter notes the American political system as it has evolved with piecemeal reactions to current events. Each candidate during the election presented a set of disconnected policy proposals for their political appeal. Each “approached the economy with long held ideologies and policy positions, many of which no longer fit with today’s reality. I believe Professor Porter would like to see an ORGANIZED APPROACH TO POLICIES THAT PROMOTE LONG TERM GROWTH AND COMPETITIVENESS.
Where does the US really stand? Prof Porter says the US has prospered because of unique competitive strengths. 1) The US has an unparalleled environment for entrepreneurship and starting new companies. 2) US Entrepreneurship has been fed by a science, technology, and innovation that is by far the best in the world. 3) The US has the world’s best institutions of higher learning. 4) The US has been the country with the strongest commitment to competition and free markets. 5)The task of forming economic policy and putting it into practice is highly decentralized across states and regions. This decentralization maybe the US greatest competitive strength. 6) The US benefits from the most efficient capital markets of any nation. This especially true of risk capital. 7) The US has remarkable dynamism and resilience to take losses and move on.
Prof Porter warns us that what has driven our success is starting to erode.
TO BE DISCUSSED IN OUR NEXT BLOG.
Elizabeth Warren head of the oversight panel setup by Congress to monitor the Federal Bailout says, “THE GOV’T STILL DOES NOT SEEM TO HAVE A COHERENT STRATEGY FOR EASING THE FINANCIAL CRISIS. “ Instead the gov’t seemed to be lurching from one tactic to the next without clarifying how each step fits into the overall plan. The overall impression is one of confusion by a leadership(?) that does not know what it is doing.
One of the reasons for Ms. Warren’s observation is the US does not have an economic strategy. As Yogi Berra a modern day philosopher has observed. “If you don’t know where you are going you may not get there.“
Professor Michael Porter distinguished Harvard Business School Professor has written in the Nov. 10 issue of Business Week an article explaining why he believes the development of a economic strategy is critical.
Professor Porter notes the American political system as it has evolved with piecemeal reactions to current events. Each candidate during the election presented a set of disconnected policy proposals for their political appeal. Each “approached the economy with long held ideologies and policy positions, many of which no longer fit with today’s reality. I believe Professor Porter would like to see an ORGANIZED APPROACH TO POLICIES THAT PROMOTE LONG TERM GROWTH AND COMPETITIVENESS.
Where does the US really stand? Prof Porter says the US has prospered because of unique competitive strengths. 1) The US has an unparalleled environment for entrepreneurship and starting new companies. 2) US Entrepreneurship has been fed by a science, technology, and innovation that is by far the best in the world. 3) The US has the world’s best institutions of higher learning. 4) The US has been the country with the strongest commitment to competition and free markets. 5)The task of forming economic policy and putting it into practice is highly decentralized across states and regions. This decentralization maybe the US greatest competitive strength. 6) The US benefits from the most efficient capital markets of any nation. This especially true of risk capital. 7) The US has remarkable dynamism and resilience to take losses and move on.
Prof Porter warns us that what has driven our success is starting to erode.
TO BE DISCUSSED IN OUR NEXT BLOG.
Sunday, December 21, 2008
WHERE is the Pied Pipeer of Wall St. TAKING US?
GET THE FACTS BEHIND THE NEWS
Elizabeth Warren head of the oversight panel setup by Congress
to monitor the Federal Bailout says, “THE GOV’T STILL DOES NOT SEEM TO HAVE A COHERENT STRATEGY FOR EASING THE FINANCIAL CRISIS despite the billions it already spent in that effort”. "Instead the gov’t seemed to be lurching from one tactic to the next without clarifying how each step fits into the overall plan. The overall impression is one of confusion by a leadershp(?) that does not know what it is doing.
One of the reasons for Ms. Warren’s observation is the US does not have an economic strategy or for that matter a strategy for many other important areas.
Professor Michael Porter distinguished Harvard Business School Professor has written in the Nov. 10 issue of Business Week an article explaining why he believes the development of a economic strategy is critical.
Professor Porter notes the American political system as it has evolved with piecemeal reactions to current events. Each candidate during the election presented a set of disconnected policy proposals for their political appeal. Each “approached the the economy with long held ideologies and policy positions, many of which no longer fit with today’s reality. I believe Professor Porter would like to see an organized approach to policies that promote long term growth and competitiveness
Professor Porter has measured the US economic effort against other countries. The US is not in the top 10 as a free market economic in many important aspects. MORE ON THIS.
Elizabeth Warren head of the oversight panel setup by Congress
to monitor the Federal Bailout says, “THE GOV’T STILL DOES NOT SEEM TO HAVE A COHERENT STRATEGY FOR EASING THE FINANCIAL CRISIS despite the billions it already spent in that effort”. "Instead the gov’t seemed to be lurching from one tactic to the next without clarifying how each step fits into the overall plan. The overall impression is one of confusion by a leadershp(?) that does not know what it is doing.
One of the reasons for Ms. Warren’s observation is the US does not have an economic strategy or for that matter a strategy for many other important areas.
Professor Michael Porter distinguished Harvard Business School Professor has written in the Nov. 10 issue of Business Week an article explaining why he believes the development of a economic strategy is critical.
Professor Porter notes the American political system as it has evolved with piecemeal reactions to current events. Each candidate during the election presented a set of disconnected policy proposals for their political appeal. Each “approached the the economy with long held ideologies and policy positions, many of which no longer fit with today’s reality. I believe Professor Porter would like to see an organized approach to policies that promote long term growth and competitiveness
Professor Porter has measured the US economic effort against other countries. The US is not in the top 10 as a free market economic in many important aspects. MORE ON THIS.
Saturday, December 20, 2008
HELP for troubled Mortgage Holders?
THE FACTS BEHIND THE NEWS
The $700 Bil bailout, according to Treasury Secretary Paulson, will not be used to help troubled mortgage holders. Sec. Paulson has admitted he has the authority to use the money for troubled homes but has refused to do so.
Federal Reserve Chairman Berneke has said he is working on a plan to subsidize 30 yr mortgages. However his plan will only help new owners. The plan is not meant for old or present owners.
The FDIC plan for modification of mortgages by extending the life of the mortgage and reducing payments to 31% of monthly income comes closest to helping troubled homes. Even this plan only covers about 20 % of the number of troubled mortgages expected to go to foreclosure in the next few years, The FDIC expects 1/3 of the helped homes to default on the modified mortgages.
It looks to Diogenes like most of the troubled mortgage holders have been left to hang in the wind. The longer the discussions go on without any help the worse the situation will get. The large increase in unemployment rates will only accelerate the downward spiral.
Diogenes believes the President, the Congress. and the public have not faced up to the economic problems. This is a chronic problem of the Bush administration with the help of a docile spineless democratic leadership.. The face up statement can be made for terrorism, education. global warming, etc.
What PLAN if any is the pied piper of Vall St. following?
The $700 Bil bailout, according to Treasury Secretary Paulson, will not be used to help troubled mortgage holders. Sec. Paulson has admitted he has the authority to use the money for troubled homes but has refused to do so.
Federal Reserve Chairman Berneke has said he is working on a plan to subsidize 30 yr mortgages. However his plan will only help new owners. The plan is not meant for old or present owners.
The FDIC plan for modification of mortgages by extending the life of the mortgage and reducing payments to 31% of monthly income comes closest to helping troubled homes. Even this plan only covers about 20 % of the number of troubled mortgages expected to go to foreclosure in the next few years, The FDIC expects 1/3 of the helped homes to default on the modified mortgages.
It looks to Diogenes like most of the troubled mortgage holders have been left to hang in the wind. The longer the discussions go on without any help the worse the situation will get. The large increase in unemployment rates will only accelerate the downward spiral.
Diogenes believes the President, the Congress. and the public have not faced up to the economic problems. This is a chronic problem of the Bush administration with the help of a docile spineless democratic leadership.. The face up statement can be made for terrorism, education. global warming, etc.
What PLAN if any is the pied piper of Vall St. following?
Sunday, December 14, 2008
FDIC Proposes a Mortgage Plan
Get the facts behind the NEWS
Sheila Bair head of The (FDIC) Federal Deposit Insurance Corp. has been championing a plan. Ms. Bair says the plan could help 2.2 million home owners with troubled mortgages keep their homes. MS. Bair is a republican appointed by Pres. Bush two years ago after serving many years at FDIC.
The plan is to modify the troubled mortgages by extending the time of the loan and reducing the interest rates so that payments do not exceed 31 % of monthly income. Under this plan the US Gov’t would guarantee the mainly risky( low down payments and/or weak credit) loans . Under this plan the taxpayers would absorb 1/2 the loss on modified loans if the borrower defaults on the modified loan. She says this should encourage mortgage houses to modify their troubled mortgages. In addition the mortgage house would be paid $1,000 for each modified loan. This p[an has been put into effect for 65,000 Indy-Mac homeownera and is part of the Citigroup bailout
Ms. Bair stated the FDIC expects 1/3(750,000) of the modified loans to default. This plan would save 1,500,000 homes from foreclosure at a cost to the US gov’t of $24 bil. Moody ’s Economy.com expects 10 mi.l foreclosures over the next 5 years.
The Treasury and the White House are fighting this plan Critics estimate the plan would cost $70 bil, Treasury Asst Secretary Neel Kashkart said "the $700 bil bailout plan was to make investments with the hope of getting the money back". He called the FDIC plan a gov’t spending program with no chance of repayment. No doubt there were homeowners who deliberately overbought. However most(personal opinion) homeowners bought in good faith. Many of these people were enticed by gov’t programs offering easy terms and were not protected by any gov’t oversight, federal or local. Many of these homeowners had little experience in real estate or home ownership. Diogenes believes the gov’t bears much of the responsibility for the foreclosure situation.---- more suggested solutions next
Sheila Bair head of The (FDIC) Federal Deposit Insurance Corp. has been championing a plan. Ms. Bair says the plan could help 2.2 million home owners with troubled mortgages keep their homes. MS. Bair is a republican appointed by Pres. Bush two years ago after serving many years at FDIC.
The plan is to modify the troubled mortgages by extending the time of the loan and reducing the interest rates so that payments do not exceed 31 % of monthly income. Under this plan the US Gov’t would guarantee the mainly risky( low down payments and/or weak credit) loans . Under this plan the taxpayers would absorb 1/2 the loss on modified loans if the borrower defaults on the modified loan. She says this should encourage mortgage houses to modify their troubled mortgages. In addition the mortgage house would be paid $1,000 for each modified loan. This p[an has been put into effect for 65,000 Indy-Mac homeownera and is part of the Citigroup bailout
Ms. Bair stated the FDIC expects 1/3(750,000) of the modified loans to default. This plan would save 1,500,000 homes from foreclosure at a cost to the US gov’t of $24 bil. Moody ’s Economy.com expects 10 mi.l foreclosures over the next 5 years.
The Treasury and the White House are fighting this plan Critics estimate the plan would cost $70 bil, Treasury Asst Secretary Neel Kashkart said "the $700 bil bailout plan was to make investments with the hope of getting the money back". He called the FDIC plan a gov’t spending program with no chance of repayment. No doubt there were homeowners who deliberately overbought. However most(personal opinion) homeowners bought in good faith. Many of these people were enticed by gov’t programs offering easy terms and were not protected by any gov’t oversight, federal or local. Many of these homeowners had little experience in real estate or home ownership. Diogenes believes the gov’t bears much of the responsibility for the foreclosure situation.---- more suggested solutions next
Tuesday, December 9, 2008
Ben Bernake suggests HELP FOR MORGAGE HOLDERS
GET THE FACTS BEHIND THE NEWS
Ben S. Bernake, Chairman of the Federal Reserve, warned on Thursday that the soaring number of foreclosures threatened the economy. He then proposed some ideas — government-engineered loan modifications, and more taxpayer money to help people refinance.
At the Treasury Department, meanwhile, top officials continued to work on a plan to bolster the housing market by subsidizing 30-year home mortgages with rates as low as 4.5 percent — a level that home buyers have not seen since the early 1960s.
Since the financial crisis began last summer, both the Fed and the Treasury had focused almost exclusively on patching up the financial system — propping up banks, Wall Street firms, money market funds and issuers of commercial debt.
The new focus on helping individuals could create a bitter split between those who want to buy homes and those who already own them.
The cheap mortgages would be available only for people buying houses, not the roughly 50 million families that already have mortgages and would want to refinance at a lower rate. As a result, the plan offers no direct relief to the millions of people who face foreclosure because they took out exotic mortgages that they could not afford. Nor would the plan offer any benefit to people who have stayed current on their mortgages and would simply be interested in taking advantage of a lower. rate,
How does this plan compare to the FDIC plan. See next blog.
Ben S. Bernake, Chairman of the Federal Reserve, warned on Thursday that the soaring number of foreclosures threatened the economy. He then proposed some ideas — government-engineered loan modifications, and more taxpayer money to help people refinance.
At the Treasury Department, meanwhile, top officials continued to work on a plan to bolster the housing market by subsidizing 30-year home mortgages with rates as low as 4.5 percent — a level that home buyers have not seen since the early 1960s.
Since the financial crisis began last summer, both the Fed and the Treasury had focused almost exclusively on patching up the financial system — propping up banks, Wall Street firms, money market funds and issuers of commercial debt.
The new focus on helping individuals could create a bitter split between those who want to buy homes and those who already own them.
The cheap mortgages would be available only for people buying houses, not the roughly 50 million families that already have mortgages and would want to refinance at a lower rate. As a result, the plan offers no direct relief to the millions of people who face foreclosure because they took out exotic mortgages that they could not afford. Nor would the plan offer any benefit to people who have stayed current on their mortgages and would simply be interested in taking advantage of a lower. rate,
How does this plan compare to the FDIC plan. See next blog.
Saturday, December 6, 2008
Can $800 billion get us out of the DEPRRESSION?
GET THE FACTS BEHIND THE NEWS PART 4
Financial plans to get us out of a “depression” are coming fast and furious. Secretary of the Treasury Paulson with the help of the Federal Reserve Bank has announced an $800 billion fiscal stimulus. This stimulus is different than previous financial helps.
Since the financial crisis began last summer, both the Fed and the Treasury had focused almost exclusively on patching up the financial system — propping up banks, Wall Street firms, money market funds and issuers of commercial debt.
This financial imitative gets closer to the consumer possibly to answer those who believe help should be for main street, where the problems begin and not wall street where main street problems can end up.
This Paulson plan has twor parts. (A)To lower interest rates on loans for home buyers the gov’t announced it will buy up to $100 billion in mortgages held by Freddie Mac and Fannie May. It will buy up to $500 billion of mortgages securities held by the two housing giants plus Ginnie May.
What this means for home owners and the housing markets is uncertain. This may reduce interest rates but not slow the growing rate of foreclosures accordng to the economic experts.
At the same time the gov’t, announced through the TALF (Term Asset Backed Securities Loan Facility) a $200 billion program. This program will loan money at attractive ratea to private investors who buy securities backed by auto and student loans, credit cards and small business loans guaranteed by the Small Business Administration. The plan will also guarantee the loans if underlying securities default.
The prograqm should lower rates for auto loans for those with confidence to buy an auto Good credit card risks have not been effected. Poor credit card risks have been cut back. The effect this program will have on increasing credit to poor credit risks is unknown. Student loans are another area where the effect of the program is unknown due to conflicting opinions. More on the latest developments.
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Financial plans to get us out of a “depression” are coming fast and furious. Secretary of the Treasury Paulson with the help of the Federal Reserve Bank has announced an $800 billion fiscal stimulus. This stimulus is different than previous financial helps.
Since the financial crisis began last summer, both the Fed and the Treasury had focused almost exclusively on patching up the financial system — propping up banks, Wall Street firms, money market funds and issuers of commercial debt.
This financial imitative gets closer to the consumer possibly to answer those who believe help should be for main street, where the problems begin and not wall street where main street problems can end up.
This Paulson plan has twor parts. (A)To lower interest rates on loans for home buyers the gov’t announced it will buy up to $100 billion in mortgages held by Freddie Mac and Fannie May. It will buy up to $500 billion of mortgages securities held by the two housing giants plus Ginnie May.
What this means for home owners and the housing markets is uncertain. This may reduce interest rates but not slow the growing rate of foreclosures accordng to the economic experts.
At the same time the gov’t, announced through the TALF (Term Asset Backed Securities Loan Facility) a $200 billion program. This program will loan money at attractive ratea to private investors who buy securities backed by auto and student loans, credit cards and small business loans guaranteed by the Small Business Administration. The plan will also guarantee the loans if underlying securities default.
The prograqm should lower rates for auto loans for those with confidence to buy an auto Good credit card risks have not been effected. Poor credit card risks have been cut back. The effect this program will have on increasing credit to poor credit risks is unknown. Student loans are another area where the effect of the program is unknown due to conflicting opinions. More on the latest developments.
.
Friday, November 21, 2008
NAIN STREET-WHERE IS THE MONEY?
can we make a RECESSION PAINLESS? PART 3
GET the FACTS behind the NEWS
The federal gov’t has agreed to spend $300 plus billion on bailouts of various companies plus $750 billion to ease banking liquidity. This does not include $160 billion economic stimulus payment with talk of another stimulus program probably as much or more. This is in addition to a $417 billion budget deficit.
However what is happening is that the large banks are sitting on the public money to protect against their own losses. If financially well of,with the approval of Treasury Secretry Paulson, they are looking to acquire banks or their assets at bargain prices. .
Now a new complication. On Nov. 3, 2008 the Federal Reserve reported its latest quarterly survey of bank lending practices. The Federal Reserve said that “a high number of bank reported they had made it tougher to borrow across a broad range of loan products”. 60% of the banks had tightened credit card debt, 80% had tightened business and commercial loans. 95% raised costs for lines of credit to large and medium size business. 50% of domestic banks said they ”were somewhat or much less willing” to make consumer installment loans This report was for Oct. 1-15th.
WASHINGTON Nov. 19 — The Treasury secretary, Henry M. Paulson Jr., on Tuesday rejected pleas to use money from the $700 billion bailout program to help homeowners avoid foreclosure or to stave off bankruptcy by Detroit’s Big Three automakers.
Mr. Paulson acknowledged that he had the authority to use bailout money for homeowners, but he insisted that the money should go toward “investment” in financial institutions rather than “spending” on rescue efforts.“We have seen that capital purchases are clearly powerful in terms of impact for dollar of investment,” he said in his prepared testimony.
FEDERAL FINANCIAL HELP IS NOT GETTING TO MAIN STREET.
Next, what are others doing to help.
GET the FACTS behind the NEWS
The federal gov’t has agreed to spend $300 plus billion on bailouts of various companies plus $750 billion to ease banking liquidity. This does not include $160 billion economic stimulus payment with talk of another stimulus program probably as much or more. This is in addition to a $417 billion budget deficit.
However what is happening is that the large banks are sitting on the public money to protect against their own losses. If financially well of,with the approval of Treasury Secretry Paulson, they are looking to acquire banks or their assets at bargain prices. .
Now a new complication. On Nov. 3, 2008 the Federal Reserve reported its latest quarterly survey of bank lending practices. The Federal Reserve said that “a high number of bank reported they had made it tougher to borrow across a broad range of loan products”. 60% of the banks had tightened credit card debt, 80% had tightened business and commercial loans. 95% raised costs for lines of credit to large and medium size business. 50% of domestic banks said they ”were somewhat or much less willing” to make consumer installment loans This report was for Oct. 1-15th.
WASHINGTON Nov. 19 — The Treasury secretary, Henry M. Paulson Jr., on Tuesday rejected pleas to use money from the $700 billion bailout program to help homeowners avoid foreclosure or to stave off bankruptcy by Detroit’s Big Three automakers.
Mr. Paulson acknowledged that he had the authority to use bailout money for homeowners, but he insisted that the money should go toward “investment” in financial institutions rather than “spending” on rescue efforts.“We have seen that capital purchases are clearly powerful in terms of impact for dollar of investment,” he said in his prepared testimony.
FEDERAL FINANCIAL HELP IS NOT GETTING TO MAIN STREET.
Next, what are others doing to help.
Monday, November 10, 2008
MAIN SREET-WHERE IS THE MONEY
can we make
A RECESSION PAINLESS? Part 2
GET THE FACTS BEHIND THE NEWS
The Congress and the Executive branch of the Federal gov’t have embarked on a new mission. How to make a recession painless. The federal gov’t has agreed to spend $300 plus billion on bailouts of various companies plus $750 billion to ease banking liquidity. This does not include $160 billion economic stimulus payment with talk of another stimulus program probably as much or more. This is in addition to $420 billion Federal deficit budget.
Diogenes is concerned that the measures taken so far are essentially blank checks to the same managements that appear incompetent and failed their company and the public. AIG Insurance was a large well financed insurance company. Management has changed recently. Maybe it should change again. AIG was originally given $85 billion and requested an additional$37.5 billion. General Motors received $25 billion and has now requested an additional $25 billion. GM is a company that was at the top of its field. GM has been going downhill for 40 years. Diogenes believes the Congress should demand new management and demand all models of GM have hybrid engines within three to four years.
This system of subsidizing inefficient companies only leads to trouble further on. It is a system used by communist China before they decided to modernize. One day in the near future you turn around and you have a whole range of inefficient companies that can not compete in the marketplace on their own but require constant subsidies.
Next we will discuss the validity of the gov't(public) making good on everyone’s loses.
A RECESSION PAINLESS? Part 2
GET THE FACTS BEHIND THE NEWS
The Congress and the Executive branch of the Federal gov’t have embarked on a new mission. How to make a recession painless. The federal gov’t has agreed to spend $300 plus billion on bailouts of various companies plus $750 billion to ease banking liquidity. This does not include $160 billion economic stimulus payment with talk of another stimulus program probably as much or more. This is in addition to $420 billion Federal deficit budget.
Diogenes is concerned that the measures taken so far are essentially blank checks to the same managements that appear incompetent and failed their company and the public. AIG Insurance was a large well financed insurance company. Management has changed recently. Maybe it should change again. AIG was originally given $85 billion and requested an additional$37.5 billion. General Motors received $25 billion and has now requested an additional $25 billion. GM is a company that was at the top of its field. GM has been going downhill for 40 years. Diogenes believes the Congress should demand new management and demand all models of GM have hybrid engines within three to four years.
This system of subsidizing inefficient companies only leads to trouble further on. It is a system used by communist China before they decided to modernize. One day in the near future you turn around and you have a whole range of inefficient companies that can not compete in the marketplace on their own but require constant subsidies.
Next we will discuss the validity of the gov't(public) making good on everyone’s loses.
Thursday, November 6, 2008
MAIN STREET-WHERE IS THE MONEY
can we make A RECESSION PAINLESS ? Part 1
The federal gov’t has agreed to spend $300 plus billion on bailouts of various companies plus $750 billion to ease banking liquidity. This does not include $160 billion economic stimulus payment with talk of another stimulus program probably as much or more. This is in addition to a $417 billion budget deficit.
However what is happening is that the large banks are sitting on the public money to protect against their own losses or if financially well off they are looking to acquire banks or their assets at bargain prices. .
Now a new complication. On Nov. 3, 2008 the Federal Reserve reported its latest quarterly survey of bank lending practices.
The Federal Reserve said that “a high number of bank reported they had made it tougher to borrow across a broad range of loan products”. 60% of the banks had tightened credit card debt, 80% had tightened business and commercial loans. 95% raised costs for lines of credit to large and medium size business. 50% of domestic banks said they ”were somewhat or much less willing” to make consumer installment loans This report was for Oct. 1-15th.. Financial help is not rapidly getting to main street.
Perhaps some of this tightening was needed. But, we must be careful not to repeat one of the great mistakes of the 1929 Great Depression. According to Milton Friedman, in reacting to the speculation at that time, we tightened credit too much and stifled the economy.
The federal gov’t has agreed to spend $300 plus billion on bailouts of various companies plus $750 billion to ease banking liquidity. This does not include $160 billion economic stimulus payment with talk of another stimulus program probably as much or more. This is in addition to a $417 billion budget deficit.
However what is happening is that the large banks are sitting on the public money to protect against their own losses or if financially well off they are looking to acquire banks or their assets at bargain prices. .
Now a new complication. On Nov. 3, 2008 the Federal Reserve reported its latest quarterly survey of bank lending practices.
The Federal Reserve said that “a high number of bank reported they had made it tougher to borrow across a broad range of loan products”. 60% of the banks had tightened credit card debt, 80% had tightened business and commercial loans. 95% raised costs for lines of credit to large and medium size business. 50% of domestic banks said they ”were somewhat or much less willing” to make consumer installment loans This report was for Oct. 1-15th.. Financial help is not rapidly getting to main street.
Perhaps some of this tightening was needed. But, we must be careful not to repeat one of the great mistakes of the 1929 Great Depression. According to Milton Friedman, in reacting to the speculation at that time, we tightened credit too much and stifled the economy.
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