Wednesday, December 03, 2008

More Bailouts

So the bailout proceeds without oversight. What else is new?

How about more criminal investigations of the SEC and securities appraisers? Investigate the SEC and the securities ratings services and a lack of competition.

Will the bailouts prop up prices? Will that help the little guy? What will help the smallholders?

Assumptions about future financial situations should be absent from mortgage arrangements, which would void any ARM contracts in favor of the teaser rate. Avoiding raising the ARMS is an aim of low interest rates, which leaves depositors taking the low interest rate hit. How about lowering the price instead of the interest rates? More sales would result, while maintaining a reasonable rate of return for depositors. Lowering prices would be more beneficial to more people than lowering interest rates.

Of course, lowering prices would create more upside down debt, where people owe more than the goods they bought with borrowed money are worth. It is safe to say that this posited situation of lower prices for real estate and goods would benefit more people than those who indebted themselves. Fair interest rates for depositors would raise the level of deposits, regaining real capital.

If the people running things profit from higher prices at the expense of most of the rest of us, policy reviews are in order.

Engineered inflation and constant growth are untenable positions in a finite world. Cancel the construction and sale of debt based securities, as they produce nothing of real value, only taxpayer supported gambling debt.

Let Las Vegas handle the gambling.

Monday, November 24, 2008


Another bailout? This time to Citigroup. What’s a few more billion? Job stimulus packages are much smaller, however.

Tell me why this money can’t be funneled directly to the funds put together by the taxpayer? Like in Arizona, the state retirement fund, county funds and other governmental funds lost money on the Lehman bankruptcy.

So bailout the important funds that belong to the taxpayer, not the lending institutions who sold fraudulent securities to USA retirement, state, county and county funds. Give these funds the bailout money. Give them back the money they lost and don’t funnel it through more brokers. The Feds should take applications based on investor losses, skip the corrupt middlemen, and deal with the American citizens represented by their local governments who lost money. This would infuse money into local economies where job losses are escalating. Let these citizen funds decide investment in local projects with projected returns paying into the funds through existing taxes. We need a long term fix on this problem of exporting our local money to be lent out in Ponzi schemes.

How about more criminal investigations of these scams? We need law and order, not more burglary.

We need simplification. We need our money back. Thieves stole our funds as they sold bogus securities to the fund managers, who took the word of appraisers and raters and bought this garbage. Giving the thieves our tax money to give to the lenders to lend to us again to buy price inflated goods again is not an economic system. It’s a milking machine.

Monday, November 03, 2008

1940 and 2009

A Comparison of Great Depression Recovery Conditions and the Present

A comparison of the great depression recovery utilization of the mid 1900s to what is available to us in 2009 for an economic recovery from October 2008 conditions is a useful tool for understanding the scope of the problem confronting the survival of our civilization. Comparing 1940 with 2008 is a useful analogy as an action plan is developed. Some basic divisions in the economic recovery would include: raw materials availability and price, transportation costs, water availability and sustainability, farming technology, pollution and sanitation, population density, technological innovation rates, research and development funding, education of the workforce, land price and availability, and doubtless many other considerations.

A brief overview of some of these comparison considerations should note the fact that federally financed research and development has fueled trillions in business spinoffs. Investment in specific research aimed at solving our energy needs without a quality of life lessening as energy prices rise. I do believe that the 2008 recession was brought about by increasing energy costs, rather than the stock market obsession with bilking each other with worthless ‘securities’. Bailing out criminals with tax money is an unproven approach.

Innovation level
Information processing could produce technological breakthroughs in energy management: approach for management might include research in efficiency of use, temporary retrofits, downsizing vehicles, increasing rail availability,…

Post WWII: construction boom and expansion into unoccupied territories. Rapid population growth increased need for goods and services. Increasing mechanized farm production and cheap fuel upped agricultural production. Overseas commerce increased, flooding the market with cheap goods. Prosperity through growth and increased consumption of resources. Information technology is a growth industry. Rapid increase in technology postwar due to government and business research programs.

Present: Rapid population growth increases competition for resources that are escalating in value over the long term. Empty land with water is no longer plentiful. Expansionistic construction has created a surplus of housing. Devaluation of bubble value is now occurring and many houses and commercial properties are on the market. Construction will not create a recovery unless a years long wait is tolerated and a lower level of activity is expected. Competition for land will increase. A growing population is not a benefit in times of high unemployment. Population numbers need to stabilize, or material impoverishment will occur as resource per person dwindles.

Thus the recovery mechanisms after the Depression are not available to us now. Space and energy is becoming more expensive. Infinite population growth in a finite space has become nonadaptive cultural behavior that will result in overcrowding, scarce resources and less available wealth per individual. Government programs are complex and unwieldy when conditions change, which was not the case after WW II.

Reducing spending on energy is top priority. In the absence of improved technology, conservation is an immediate remedy for at least some spending on petroleum, which is where such wealth is increasing long term. Short term solutions include fleet conversions, economical individual options for transportation, cheap public transportation, and adequate bicycle and cart thoroughfares. Developing alternative technology is preferable to stripping the nation of petroleum reserves. Developing alternative energy also provides employment in constructing units, installation and retrofits. Expanding public transportation would also provide jobs. Federal grants to universities and businesses to fund research would be money well spent.

Reducing demand for petroleum has been accomplished to some degree and the trend must continue. Encouragement of petroleum conservation can be accomplished through several avenues:
Raise prices through taxation
Tax gas guzzlers
Tax companies that continue to manufacture and market gas guzzlers
Create policy that would make it difficult to finance gas guzzlers
No bailouts or loans to companies that continue to manufacture and market gas guzzlers

Use highway funds for public transportation and repair, rather than for new roads. Public transportation must be improved, added, expanded and all avenues should be considered:
Bus networks and expansion of schedules
Light rail
Regular rail

Public policy must be amended to allow for alternative small vehicles. Existing streets can be designated for bicycles, small motorbikes, golf carts and other small personal vehicles, but public policy must allow for these kinds of changes. Pedestrian only streets should be considered in more cities.

One aspect of the post WWII economy is the difference between the manufacturing/agricultural economy of then and the service economy of now. A service economy is vulnerable to economic slowdown, particularly in the luxury services. A manufacturing and agricultural economy feeds on itself through employment and consumption, which should be balanced if the population size stabilized. From a long term perspective, depending on growth in a finite space with finite materials is ultimately foolish behavior. The present tax structure encourages population growth. Such an incentive is a good example of an old response that has now become counterproductive. Possibly citizens should pay a tax that covers the expense to the system of the new addition to the population, rather than receive a subsidy for breeding, like we still had Manifest Destiny.

In 2008, the economy lost jobs, petroleum rose to $150 a barrel and inflation spiraled upwards as the world’s monetary resources flowed to those who sold oil resources. The discovery of liars and bilking in the stock markets around the world has forced bailouts by the governments of the various banking systems. Apparently value had been found in dealing in defaults, bundles, derivatives and other phenomena that never actually produced anything but an elaborate scam that investors wanted to reap high interest rates from but now wants the government to reimburse them for losses. Smallholders who lost retirement funds will get nothing, however. The social climate was a bit different in 1945 than it is in 2008. Entitlements are a huge issue in 2008, as deficit spending and population growth stall the economy.

The credit card people offered to forgive 40% of credit card debt on certain cardholders, which is generous of them considering the nonproductive tactics used to run up the debt and the interest rate on the debt. A hastened return to a cash economy due to a lack of credit given to people who will not pay it back seems like a bargain. Maybe higher interest rates on savings accounts and certificates of deposit would encourage people to save for down payments on cars, homes and other items. Increased savings rates would benefit the economy by bringing in investors.

Given that the availability of raw materials is being tapped out, it makes sense to look for a new source. Federal investment in research and development produced the space program, which has the potential for spinoffs, including mining on the moon that would give us access to a variety of minerals and metals like titanium. This is one area of expansion that was not available post WW II. President Kennedy never intended for us to forget about the moon once we visited.

What is actually productive in our economy? Financial derivatives are detrimental in that the brokers for them reap immediate profits but care not if the derivatives pay off. Derivatives produce nothing beneficial for society as a whole, leaving enormous profits/loot in the hands of a few. Manufacturing is productive if the union demands are not ultimately self defeating if the company goes broke due to lack of financial stability and union control of resources. Insurance is a racket and AIG is now being bailed out by the Federal government, for example. Mandatory insurance takes too much out of the economy and ties up the money for the executives to use for their own interests and bonuses. Competitive insurance needs to happen and employers need to get out of the insurance providing treadmill of ever escalating costs. Insurance is sucking the economy dry of cash and then using the money carelessly. Lawsuits are another nonproductive issue where enormous sums are invested in malpractice insurance and lawyers, which raises the cost of health care.

So what is productive? Our information technology is superior in the world. Our agriculture feeds the hungry and our manufactured goods are top quality. We can become more energy efficient and provide jobs while doing it. Our society must adapt to the new conditions of higher energy costs, overcrowding and dwindling resources. We can succeed by using our technology and increasing our horizons with an expanded space program that provides jobs and opportunity for technological advancement. We can succeed by investing in the United States and by buying goods made in the United States and trading with our neighbors in Canada and Mexico and Cuba.

Raise the interest rates to encourage saving, create jobs to repair the infrastructure, require down payments for credit requests, control credit card charges and restructure insurance into a competitive industry instead of a mandated program, protect medical personnel from frivolous malpractice lawsuits, tax companies that take jobs overseas and encourage a strong dollar to bring petroleum prices down.

The national debt is a scandal and there are those who want a weak dollar and inflation that causes the national debt to be drawn down on a global level. This is total selfishness in that inflation hurts every consumer. Find another way to pay back the debt. Deflation in prices is what the consumer needs but prices do not seem to fluctuate to the downside as quickly as they rise. A strong dollar appears to bring the price of petroleum down worldwide, which benefits struggling economies by lowering energy costs.

Low interest rates appear to discourage investment in the United States. Low interest rates discourage saving. Of course, low interest rates also avoid raising the payments on the Adjustable Rate Mortgages (ARMS), which is something that our leadership is using to avoid more foreclosures, to the detriment of the economic system. Perhaps these ARMS should be handled separately from the entire economic system, instead of controlling it.

ARMS are possibly one of those “financial inventions” that should be discontinued. Any other mortgage scheme that allows the broker to presume a future spike in income on the part of the buyer should be discouraged, out of moral issue or in an attempt to slow down future foreclosures. The provision of housing should not be a cash cow for lenders and brokers who take no responsibility for the social and economic damage done while they profit take. Brokering and lending are legitimate enterprises that serve a social good but the process becomes parasitic when used to create value in lending where none exists.

The past is gone forever, and that includes wide open spaces for the taking, free water and cheap energy. We must now deal with the new reality. We can succeed by working together, conserving resources, saving our money and investing in the United States.

Thursday, October 16, 2008

Trickle Down Economics Without Morality

I am sure Ronald Reagan never meant for this to happen. The rule of law must be instituted where a lack of morality harms many while enriching a few.

This is a law and order issue and I hope to see investigations and indictments.

Sunday, October 05, 2008

The Demise of Mortgage Derivatives

The demise of mortgage derivatives is a justifiable stance, given the 2008 circumstances surrounding the economic problems. I do not know who profited from the multiple sales of these questionable ‘assets’, but I do believe the law can track it down.

I see these foreclosed properties described as assets. These ‘assets’ act like liabilities to the businesses that possess them. It is suggested that these businesses receive nothing for foolishly investing in an overbuilt housing market.

Foreclosures to be sold on the discount market will be offered to the original borrower at the same rate as the discounted before being sold.

Mortgage backed securities should not be sold or purchased. Profit from mortgage lending is the interest, not mortgage related products. This attitude should be discouraged and not paid off in cash. I know that people made money selling these mortgages but the word is getting around that the original paperwork for these loans is lost because they were sold so many times.

No cash payouts to any of the executive personnel. Put them out on the street with nothing like a fired worker. Replace executives and reorganize entities and let the clerks keep their jobs.

Mortgage lending will not resume at the former pace during the boom or bubble. This industry will not support the former number of workers. This includes construction, lending, appraisers, realtors, title searchers and others connected to construction.

Require down payments for loans, raise the interest rates until saving becomes more lucrative and sit back and wait for people to save down payments and practice good money management. This will take years.

Allow the prices of homes to deflate and give all mortgage payers the same options available under the bailout for troubled borrowers, if the prices of the homes are devalued for mortgage purposes. This is only fair to those who met their obligations. These people should be rewarded, not looted. This is an easier mechanism for returning the housing market to normal (defined as units produced=units needed, units needed is defined as qualified buyers).

Favorable outcomes in managing foreclosures should be maximized and a mechanism for managing the foreclosures needs to be in place. The following concepts need to be in the comprehensive plan.

Continuation of Occupancy:

Foreclosures to be sold on the discount market will be offered to the original borrower before being sold. Go ahead with foreclosures while offering a deal whereupon the inhabitants of the home may apply to buy the home at a discount rate equal to the discount rate offered to bulk purchasers of this land and housing. If the buyer is able to qualify (a not yet defined set of circumstances), then the occupancy will remain undisturbed. Continuation of occupancy is a desirable outcome.

Increased flow of capital:

Reselling the homes at bargain rates, as is condition, would start up a cottage industry of fixing up and renting or reselling homes. Homes are not selling because they cost too much. Devalue these foreclosures and resell at market conditions. If the houses are cheaper, then more people could buy them. Avoid real estate price fixing just to shore up bogus securities. Limit more housing development until the market stabilizes. If people are upside down in their mortgages, then let them deal with it. I suggest a voluntary program wherein mortgage payers could quit and vacate in good condition without penalty.

Break up bundles of mortgage based securities:

Localize dealing with foreclosures. Sort the mortgages into categories and local areas. Set up local entities in existing government buildings to administer foreclosures and new loans and discounted cash sales. Localized banking entity would administer loans locally (within a radius of locale). Selling the mortgages would be on a case by case basis, and not to be bundled and sold for administration elsewhere. Land is local and administration of debts on it should be a local business.

Mortgage derivatives should not be permitted because the impetus for their creation and sale has nothing to do with the true purpose of mortgages, which is to get people in homes and provide capital for businesses.

The basis for mortgage lending is noted to be the socio-economic continuation of the society and these needs should determine the progression of this profitable enterprise. When the policy mechanism that created subprime lending was introduced, then the purpose of mortgage lending no longer remained to provide housing: the purpose of mortgage lending became a golden goose that provided unlimited capital and no responsibility to administer the loan and a lucrative outlet in selling mortgage derivatives.
Thus the purpose of mortgage lending became to produce as many mortgages as possible in as short a time as possible in order to maximize profits. Legitimate lending was swamped in the flood of undocumented lending.

Halting the sale of mortgage backed securities is necessary. Local administration of the loans is necessary and the success of lending policies will lead to capital infusions. As for the null and void mortgage securities, line up to the right, after the taxpayers. All this will take time, much time.

In summary, the purpose of mortgage lending should be defined as a social need in the realm of shelter and that this need should not be used as a cash cow for brokers, the new definers of what is valuable in our society. Mortgages can return to the local and the collection of the debts will remain in the community. These debts will no longer be collateral for other loans and investments, but will remain what they are: needs in the community to provide housing.

We are facing a financial slowdown as the population of the Earth forces the division of scarce resources times the number of mouths to feed. Overpopulation and the recognition of the finite quality of the Earth’s resources force our economies into depression as a monetary crisis hits the world. Interest rates are too low in an effort to prop up the housing market. Face it. Worthless ‘securities’ were sold and sold again and somebody got cheated but now investments in the USA are perceived as no longer solid and people don’t want to lose money by investing in the USA. To those who profited by these deceptions, was it worth it?

Wednesday, August 27, 2008


The economy is strained because of a rise in energy costs. The majority of the consumers do notice higher energy prices and now that the price hikes are hitting the food supply, the majority of the people are not insulated from daily economic concerns. In plain language, there is now less money being spent on retail than before because people have to pay more for fuel instead. This hits the whole economy, not just the housing market.

So what is going on in the housing market? Why is credit suddenly so ‘difficult’ to get? Who should get credit? Rather than a line of falling dominos, the housing policy is a boomerang.

October 2008 signals the end of a policy loophole in FHA allowing home sellers to pay a charity to pay down payments for people buying homes, which resulted in a 40% foreclosure rate in that group. On October 1, 08 the down payment rate will rise from 3% to 3.5%, payable by the borrower. (Arizona Daily Star, Aug. 27,08) It should be investigated whether these ‘charities’ that did this activity were crooked or just misled.

Since an easy credit policy resulted in a housing glut suddenly declared after a tightening of credit standards, then developers are left with unsold units. Now these investors who have been reaping high profits from the housing market want a bailout? Who wants the bailout? Who will benefit? Who are the investors? Who will lose money if there is a bailout? Who pays for the bailout? I need answers from our politicians.

Building beyond the ability to borrow and pay back home loans, plus the easy credit policy created an inflationary bubble where the stated dollar value exceeded the utility of the item. Some owe money for a unit worth much less than when they purchased it. With little equity possible in the future, why pay? Dump it and rent. There’s plenty of rentals.

Unsold units demonstrate the scope of the problem, which as of 2008 appears to be escalating. Foreclosures dump more on the market, which should lower the price for real estate, if the government does not prop it up to the point where the inflationary bubble is maintained.

If the Feds prop it up, money for the future is tied up and debt loads are too high, tying up money that should be circulating. Let the smallholders have the homes for $x on the dollar, payments due to the Fed while investors and lienholders stand in line. The foreclosures would refinance at foreclosure market value.

I have a few suggestions as remedies for the current financial crunch. Deflation heads the list.

The housing prices need to reflect the price of the foreclosures sold on the open market. The price per unit (bulk price divided by the number sold) will determine the low end of the appraisal pricing. If the banks loan money to inflated appraisals rather than the true selling price, then the foreclosure cycle begins again if the debt value exceeds the actual selling value of other similar units. If ‘hedge’ funds plan on bulk purchase of foreclosures, then I believe the lender should be obligated to offer the homes on the open market on an individual basis so that the populace could buy these homes at the same rate as these predatory ‘hedge’ funds. Enough has been bilked out of the real estate market. Somebody needs to inform the appraisers that the lowest price for a similar home is where the appraisal begins, not the predetermined value according to a lender offering no down deals structured to fall into foreclosure. Truth in lending should be truth in value as well. Someone buying a home for their family should not be bilked into borrowing more than the home is worth.

These ‘hedge’ predators need to find a new way to make a living along with the poor schmuck who was fired from his retail job because of a dropoff in business.

As of now, government expenditures designed to encourage the building of more residential units plus the costs of new infrastructure should be halted in favor of maintenance programs.

The encouragement of more development is not going to lead to market recovery and clamoring for more lax loaning standards will only continue the problem scam. Demanding inflated appraisals is not a moral way to do business. Expose to the light of day the identity of these principal investors and let us determine if they are worthy of a bailout. Who are they?

The business entities that perpetuated this subprime lending and adjustable rate mortgage ripoff should be disbanded, the honchos down the line be fired and investigated for fraud, truth in lending misrepresentation and misuse of public funds.

Friday, July 11, 2008

Regional Transportation Authority Expenditures

Do You Think They're Taking Our Picture?

The Regional Transportation Authority (RTA) is funding an extensive system of detection cameras in Tucson. This system is using $1,800,000 in RTA funds to install detection cameras at 34 intersections.

Since the RTA is using election tax money for detection cameras, then they should first have an election to OK this kind of funding change from roadwork. When I asked an official about funding more public transportation projects, I was told that they would have to go to the voters to make such a change in the funding formula.

A related issue is the need for public transportation expansion, rather than the construction of new roads. Bus ridership is up, gasoline prices are up and nationwide, personal vehicle use dropped over the 2008 4th of July holiday. The city and county need more bus service but the RTA is locked into expensive new road projects we no longer need?

I lack faith in the decisions made by the RTA leadership. Their motivations appear to lack interest in the very real needs of the people in these inflationary times. We don’t need detection cameras and new roads. We need sunshades and benches at all bus stops, bus terminals at the malls and medical centers and an expanded transportation system.

Monday, June 30, 2008

RTA Accountability

I wrote this to the RTA today.


I would like to have an e copy of some information about the RTA.

Project Cost Overruns: please list the projects having or scheduled to have cost overruns. I need the project amount, the amount(s) of the cost overruns, the dates of cost overruns and the names of the contractors requesting them.

Also forward an ongoing budget and expenditures/collections as of this past fiscal year.

Thank You.

Friday, May 30, 2008

Economic Problems

OK so I have not been writing lately, having taken my creativity to work on gardening and springtime pursuits instead of sitting. These hot desert afternoons are now a good time to think and write, since it is just to hot to work outside. Tomorrow it may be hot enough to dry foods on the roof like they used to do.

What ought we be doing like they used to do? Quickly, I think of the food supply. Water use went up parallel to population growth until the 1970s, when groundwater production dropped off in relation to rising population growth. Trucking food in has become a huge necessary business for this desert city. This valley might support a roving band of fifteen humans per year under natural conditions.

The policy of the CAP is set to destroy what farming we have left and replace it with houses containing more mouths to feed. I suggest reviewing this policy, since the trucking in of foodstuffs has risen in price. Possibly the growing of vegetables could be profitable once more. It would certainly provide a cushion of local production.

Citizens can assist with this push to save on food prices. If you have vegetation, assess how you could grow a few vegetable plants. Apartment dwellers could request part of the grounds to grow squash, tomatoes and other small food plants. Not to spend more money on water, just grow something else with it. Gardens grow all year here in Arizona.

If I sound like a survivalist maybe that is correct. This community should have the long term goals of securing the food supply at a reasonable cost to the people. The water supply needs to be managed in order to maximize local food production and provide water for personal needs. People are interested in the idea of growing vegetables, partly because agriculture is our cultural heritage and partly because food prices are rising. Historically, victory gardens have been successful.

I am thankful for the railroad through Tucson. Why cannot we be an international railroad hub? This is the place for it and it could be the economic salvation of Tucson. Tucson is an international city in a position to make money off increased trade between Mexico and the United States. Passenger train connections to Nogales and beyond into Mexico would benefit the economies of this area. Build a passenger terminal for the railroad where the dump used to be and let the surrounding streets vote on new zoning according to the neighborhoods.

I call for the RTA to restudy the need for more public transportation, rather than faster wider new roads. The speed limit should be lower, in order to save gas. Possibly cutting the price of bus fare would attract more ridership, particularly since gas prices are so high. People need a price break and the buses might make more money if ridership numbers rise. If people cannot afford to get to work, the economy will suffer.

Localization of schools within walking distance of the people is a necessity. Smaller closer neighborhood schools would eliminate busing, insurance, fuel and other associated expenses. This transportation expenditure could be used instead to set up smaller schools closer to homes. If busing is necessary, low cost vouchers for student riders on public transportation should be available. Hire mothers to ride the bus with children instead of having to have a separate bus system for them. Redundancy in bus systems is too fuel foolish.

Zoning laws are crippling economic development. Archaic laws prohibit using your private property to open a small business. People who want to do business are forced to obtain storefront, pay extra fees on water and electricity, pay more fees to license, pay more taxes on everything and in general, allows only those with funds to set up a business. An idea won’t work anymore. It has to be upfront fees, zoning purchased from the city for a fee, higher utilities and others unless you are a big developer who can skip all this and rely on the government to provide all that new service need. It’s just a matter of scale, my friends. If you’re small, you have to give up a larger percentage of funding before you can even open. I say have the neighborhoods vote about zoning. Let them vote about whether they can open a business in their homes. This is the land of the free, is it not? And what an economic stimulus this opening up of new opportunity would be.

And while we are taking this on, how about easing up on the building regulations that run up the cost without any real benefit or that prevent the use of a serviceable, cheaper alternative. Why require parking when the consumer could just decide whether or not to buy? Are public school building standards a little too stringent, which drives up the cost unnecessarily? Review all these fees, regulations and cost padding in the building codes.

Insurance is taking too much out of the economy. Mandatory insurance is noncompetitive and expensive. If somebody wants insurance, they should buy it but nobody should be forced to buy it. I’m not talking about auto lien holders contract issues. I am talking about a human right of not being forced to buy something. Mandatory benefits for workers is another noncompetitive burden imposed on businesses. The effects of the mandatory insurance policy should be reviewed. Perhaps the money currently tied up in mandatory insurance would be better circulating in the local economy. There is a money shortage and this would alleviate this ‘credit crunch’ and return to a more user friendly cash economy.

Credit cards are a scam. Quit using them. They charge the seller, they charge you and they run up unearned charges at a usurious rate. Credit is for ventures and total emergencies, not as a matter of course. A moral value of saving for a desired item has been diluted by a deluge of advertising immediate gratification. Avoid interest charges by saving, then spending. These credit card people are leeches on a healthy economy because they demand unearned funds and encourage unhealthy spending habits and gross indebtedness.

All these things affect our community here in Tucson. Our freedom has been curtailed and this curtailment is being taught as the ‘way’ to do anything. The time has come to reassert freedom of choice to buy what we want, use our property how we want and to have a flourishing local cash economy.

Sunday, March 30, 2008

Investment Scams and the Federal Reserve

So now is the time to write concerning the mortgage broker sales of dud securities as a spinoff of the homebuyers who now hold an upsidedown mortgage and the people who hang on to actual cash now getting little or nothing for giving the bank the privilege of holding money. Another downside of this squabble for bubble profits are the tax rates raised by governments as the ‘value’ of the properties increased due to all the quick cash scams perpetuated by lenders now being rewarded with bailouts, cheap loans and smelly deals designed to buy $26,000,000 residences and high payoffs for CEOs. Amply rewarded CEOs of failing businesses preying on loopholes and gullibility did not accept any social responsibility. Just collect those profits, no matter how they were generated. The average person still has to pay higher taxes because of the real estate price hike.

The scam works like this:

The politicians decide that more people need to own houses so policy is suggested that loosens up credit guidelines for well researched clients who will most probably pay the loan. Not researching borrowers at all led to quicker deals and more profits, so why not?

Lending companies find that these loose guidelines allow for more and more people to qualify to buy homes, including speculators. The loose credit allows developers and builders to raise prices, because the credit will be OKed anyway. ARMs or interest only payments become the norm, in order to qualify more people for more and higher amounts of credit. These loans were structured to fail, which would give foreclosures a nice equity in a property or would allow the borrowers to refinance, as long as prices kept rising. Profits were to be had either way. If prices dropped, then people would be left owing more than the property is now worth, plus they would have the ARM factor or the interest only loans that hugely balloon in payment size. No surprise that foreclosures are on the rise.

Back to the scam. So first we have non-researched loans structured to fail that are ‘bundled’ and called securities and sold like they are a viable investment sure to balloon as soon as the ARMs or interest only payments did. It was all planned out. Everybody would pay up and the profits would flow, but it is really better if I cash out now when I sell these bogus securities to investors rounded up by big name brokers. I guess to pay the appraisers of these ‘securities’ a little would be enough if they kept their jobs.

Criminal activity? Loans structured to fail should be a criminal offense. Loaning money to people who cannot pay it back is reprehensible and rips off somebody. Who gets paid? The developer, builder, construction workers, loan personnel, real estate, appraisers, all get cash out. The bond bundlers and bond brokers cash out. The investors who put up the money to be loaned are expecting starry eyed profits based on recent paybacks based on more investment. A Ponzi scheme. The foreclosure rate woke everybody up and the profits disappeared in a wash of red ink.

Lo and behold our government takes steps to prevent this red ink from getting on anybody important. Cut the interest rates and the ARMs don’t adjust upward. It does not matter that the interest rate cuts also cut the rates paid to those unfortunate holders of cash in banks. The cut in interest rates also cut foreign investment, a little side effect of saving your buddies from taking a loss. The falling dollar makes oil cheaper for everybody but us, so the low interest rate is doing a number on the little guy in more ways than one.

So now the latest link in the scam is that a huge brokerage firm will get a bailout in order to avert a financial meltdown. What is going on? Why the bailout? Why not just let it go broke?

Retirement funds invested in low or negative yield bundled mortgage securities? Is this true? Would these retirement funds then be lost while at least three of the perpetrators lounge in millionaire luxury? Exactly who bought these worthless securities? I want to see a list of investors, how much they invested, and why is it necessary to bail them out.

It is my opinion that all this money never existed. It cannot be found because it was only a figment of the imagination fueled by cheap credit. Printing money is not the answer. Inflation is horrid as it is. The inflated housing prices were a scheme to get money via the easy credit avenue. This ‘value’ does not exist. Allow the real estate to deflate and allow people to renegotiate their loans. They did not steal the value. Somebody else did and they are living in luxury at investors and now taxpayers expense.

So the Fed bails out these same charlatans and expects to continue to do business with them, rather than bypassing them and working with the investors and homeowners. They deserve to live in a homeless camp in California where so many former homeowners now live, some in tents and some in camp trailers. I say give them a pup tent until they go to jail.

What is normal? Fair interest rates when cashholders can make a little. Fair rates for loans to people who can and will repay the money. Interest rates that attract investment. Stable currency. Raise the interest rates.

Tuesday, February 19, 2008


The news stated that a most wanted man with a $25,000,000 price on his head is assassinated in Lebanon. Our state department spokesman issued a statement that justice had been done rather than choosing to say that our preference would have been to try him in a court of law, which was a significant choice on the part of our leadership.

A lawless attitude on the part of our state department does little to forward our expressed goal of Democracy. Condoning assassination is acting as judge, jury and executioner in one ill conceived comment. I would hope that our state department would adhere to the law. Public statements should reflect the rule of law.

Continued lawlessness on the parts of opposing forces will continue the conflict. If the expressed desire of an organization is endless war, lawlessness serves that purpose. President Bush should rein in the team at the state department lest the USA be identified as a rogue nation who touts but does not respect the rule of law.

We say we believe in due process, yet pronouncements belie what we do espouse for others.

On the other side, the instant threat of retaliation was no doubt made in grief for the assassinated man. Continued savagery does not promote the causes of peace and a happy life for citizens. It would behoove both sides to call for talks in recognition and respect for each other and religious tolerance. What has been done is now over and there could be a chance for peace if retaliation from either side does not occur. Bringing the perpetrators to a court of law can remain a goal.

What leaders among us are savages?

Monday, January 14, 2008

Public Money for Public Schools

Public School Reform

A recent article in the Arizona Daily Star informed the public of this series of town halls concerning public school reform. I have a few suggestions in the area of school reform.

Short and long term reforms in these categories will be discussed:

Physical facilities
Curricular issues

1. Physical facilities

The present facilities require busing to the school site. If the school sites were smaller and more neighborhood oriented, no busing would be required. I suggest renting buildings like charter schools presently are doing, which would make the schools within walking distance of the people.

If present regulations on the part of the state or city do not allow the use of these buildings, then these regulations should be reviewed. I believe that the public school system is choked with expensive regulation designed to provide jobs for the regulators.

Any new schools should be located where no busing is required. This includes high schools.

Each of these small schools should have distance learning, internet learning and enough equipment for each student to have access to advanced learning. Any new school should employ ‘green’ technology and retrofits should be considered.

*Research indicates that smaller schools are more successful in academia and discipline.

2. Curricular Issues

The state of Arizona has a competent course of study for the students already in place, plus a battery of tests designed to diagnose success levels in the classroom. The funding for the curriculum and testing has been adequate and all this investment should not be discarded.

This course of study developed over the years by the Arizona Department of Education should also be taught and it is the duty of the teachers to teach it. It is the duty of the administrator to make sure the curriculum is taught and that the materials necessary to teach it are available to the teachers. This includes books and other materials for all the students, which is not currently the case.

The establishment of internet learning, equipment and books for each student within the schools would ensure that the students would receive expert instruction or remediation in any subject. Small high schools could participate in the internet learning while teachers on site assist and monitor progress. No bright student would be without learning opportunity.

The small high school need not be large in order to offer various topics taught by experts. The large high school concept was originally justified in that students would have access to more teachers in more subjects, but the internet corrects that problem. I believe that the huge high school concept results in higher drop out rates.

It appears that the textbook funding formula has severe problems and that students are deprived of books when the textbook money from the state is diverted into other spending. This practice needs review.

3. Staffing

A change from large, distant schools to small, neighborhood schools need not result in laying off of staff members. It is suggested that the class sizes be reduced to no more than 25 plus an aide to assist with instruction and recordkeeping. Money now spent on busing could now be used to hire more instructional staff. I know that this is money in a different category but that can be changed. Huge sums are now spent on busing, insurance etc. that could be used in the classroom or assist in dealing with the deficits in the state budget. Class sizes are too large, which leads to less effective, less personal instruction.

The small schools would have a head teacher who is given time to do administrative duties but the larger percentage of time would be spent in the classroom. The head teachers would report to an administrator over several small schools.

4. Transportation

The finance of school transportation by the state needs review and reform. It appears to encourage the use of busing through the funding formula. It appears that fuel costs are continuing to rise and it makes better sense to phase out busing rather than take an ever increasing bite out of the state budget to continue this wasteful practice. The high cost of insurance is also another reason to phase out busing.

School busing can be gradually phased out beginning at the present time. Programs for merging public transportation with student busing are used elsewhere successfully. Students ride public transportation to school. The school bus system and the public transportation system are actually an expensive duplication of services that wastes fuel, equipment and other costs.

This obviously requires an expansion of public transportation, which would be a good thing for our city. Compare the costs of the school busing and public transportation. Giving parents a voucher for rides might be cheaper than financing all those school buses.

I don’t see this as a job loss. The expansion of public transportation would absorb the workers. Bus maintenance and repair yards would still function, but as part of the public transportation system.

5. Budget

The phase out of the transportation costs would benefit the state and the schools by freeing up money currently spent hauling students. If students were charged a nominal fee to ride or the state provided vouchers to ride, the public transportation system would benefit financially.

Another wasteful practice is the provision of cars and mileage to administrators. This should be reviewed and cuts made. Video conferencing should be required in lieu of expensive travel. Long term contracts with administrators often result in high payoffs, which discourages excellence in job performance. If conferences are attended by anyone, attendees should be required to share the ideas with other staff members at meetings.

Insurance should not be free to any employee. Insurance costs could be contained by allowing staff members to control the money used to buy insurance. Each staff member would then be free to buy insurance on their own, join a plan or not have insurance. This idea would free the schools from being insurance providers for the staff and would allow staff members freedom of choice for the money they earned.

6. Sports

Physical education in the form of lifelong exercise activities and games that anyone can play without expensive equipment should be incorporated into the curriculum of the small schools.

Extracurricular sports would be available at a central location on bus routes, so students can access it. Students would be responsible for their own transportation by using the public buses. Small high schools could join a consortium and field teams in all sports for both genders. A few buses would be retained for team trips. Brilliant sports students would have the opportunity to shine and earn scholarships just like now.

Extracurricular sports would be funded through the schools by donations from parents and the business community, plus public funds and grants. It is my belief that students should not have to pay to participate in extracurricular sports if the programs are under the aegis of the public schools. These sports opportunities should be available to all, no matter what the income of the family.

I hope these suggestions assist in the school reform process. My qualifications for making these suggestions come from a long career in public education where I taught in Arizona, Texas, New Mexico and California. My educational credentials are: B.A. University of Arizona in Education 1973, M.A. in Educational Leadership Northern Arizona University 1990, and an Ed.D. in Curriculum and Instruction 1995, Northern Arizona University. My dissertation, titled An Historical Review of Public Education in Arizona, not only describes the development of public education in Arizona from 1865, but gives reform ideas and other relevant information. I am a Tucson native and deeply care about the future of this state and nation.

Dorothy Prater Niemi