Friday, January 30, 2009

Transparent Bailout Money

Where will this bailout money come from? Who has enough US dollars to loan money to us? Are we going to print money? Isn’t debt limited to the amount of money in existence? Isn’t value limited to what someone is willing to pay for something?

In a recession, you don’t get to set value and demand taxpayer payments for the difference between what people are willing to pay and what you say the widget is worth. Get out of town. Somebody lost their ass and everybody is making sure it’s not theirs lost too. You might have risked money on an investment recommended by the licensed, respected ones who finally found a way to make it big by gulling people. Are contracts written based on fraud invalid? If so, this mortgage derivative scam could be summarily cancelled and let the civil courts go after the money and the criminal courts go after the fraud. I suspect that the total sold far exceeds the amount in existence, so who will not get the delivery they paid for? That is what is under discussion now, after the moguls who engineered and profited from the boondoggle collected, redefining the old fashioned word ‘bonus’ in the process, collecting a nice cushion against hard times in the form of cold cash, not the promises on paper. They give tapeworm a bad name while the unemployment lines lengthen.

So where is this money coming from? Debt enslavement is a bit out of fashion, as so longterm servitude is not one of our intentions. Spill this information now and maybe we can finally see ourselves as some in other nations see us, according to our Viejo Treasury secretary promising what change? I am glad he is sure of all those national viewpoints, since oversight in that treasury department has been lacking but perhaps the new President will take responsibility. I just hope that propping up a failed business model does not further an ego already quite large while charging it all to the taxpayers. Mortgage derivatives are a failure. Propping up mortgage derivatives is a failure.

Any government entity taking federal funds should not give bonuses, only pay. Particularly if this entity is paying for such unearned money with tax money solicited as too important to fail, then no ‘bonuses’ should be rewarded for this failure of free enterprise. Any bonuses awarded while balance sheets headed for the red should be returned to investors. Perpetrator incomes should perhaps dip to the level of the present income of the poorest investor in the schemes.

But I stray from the topic of where the bailout money and the TARP money is coming from? Are we incurring foreign debt? If so, then to whom? For how long? What variables are being overlooked when predicting payment schedules? What variables were taken into account?

Transparency can be defined many ways. I want to know where this money is coming from, not just where it is going.

Wednesday, January 21, 2009


How to fix the mortgage crisis

Recriminations are ineffective when looking for solutions. Remembering and being watchful are warranted when forging forward though this morass of insolvent debtors.

Too big to fail comes to mind as a warning call that too few are controlling too much, to the detriment of many. These huge ‘lending institutions’ should be disbanded in favor of regional banks. The business model of selling mortgage derivatives and living off the commissions is a failure because it produces nothing.

Mortgage securities bundled and sold make the process of lending into a commodity.

Solve the foreclosure crisis by identifying all the foreclosures in any given area X, assign foreclosures to regional banks located in area X, subsidize new loans to qualified buyers or forclosees for the properties, and the regional banks holding the new mortgages will also manage the collections for these mortgages. Close the books for a percentage return on the subsidy, shared with the bank until the subsidy is paid.

Of course, the powers that be will fiercely defend mortgage derivatives as a logical outgrowth of the old mortgage business that made money by collecting interest on loans made and collected locally. The mortgage business evolved to make land more valuable and to enable citizens to buy land. The mortgage business provides for a need in our society, and should not become a pawn in an easy money policy that enables profit taking and debt spawning for nothing produced.

My suggestion is that mortgage derivatives be outlawed and any instrument using them be declared invalid due to the outlandish methods used to assemble these bundles. Arrests are imminent and I see these bundles are illegal, beginning with the original properties sold to unqualified buyers, inflated appraisals based on a developer-lender-appraiser monopolies, bundled securities given unresearched bogus high ratings by more appraisers, insiders at the SEC turning their heads, fund managers on the lam and no doubt more illegal possibilities.

If foreign governments are holding these bogus derivatives, they bought an illegal ‘product’. Using the generation of mortgages as a commodity is a failed business model that should be outlawed. We need to take care of our own people and handle this real estate overproduction and overpricing in our communities. Work with regional banks, regional foreclosures and regional management of mortgages. Allow the real estate prices to drop until people can afford to buy.

Forget bailing out these huge lenders. Clean the temple of the moneylenders and allow a new regional based banking system to resurface. Too big to fail might really mean too big to succeed.