September 25, 2008

Our Economy, The Economy, and Other Stuff

The economy is bad. From my point of view it's been bad. If people have been relying on "easy credit" to cover the essentials (a place to live, transportation, and basic needs), you can't get any worse.

Bush mentioned excesses. Around this house an excess purchase would be purchasing new brakes for the truck, which was a parts only purchase. Labor came from the sweat of our own brow.

We're not buying new Wii consoles, TVs, or even music CDs. We haven't rented a movie or ordered a pizza since I can't even remember when. In this house there is no excess.

Even so, our household economy is in state of instability. Everything is going up while our income stagnates.

About the construction boom...It's all over here. There are new developments tearing up the hillsides. Then the houses sit vacant for months, years in some cases. There's one house we drive by that's been sitting empty for 3 years (at least) since construction was completed. Sad.

I feel for all those who purchased homes with ARMs. I can kind of see why they went for it at the onset. But in the long run, you are going to pay. Always go fixed rate, always.

Is this our fault? If you ask me, it's the fault of the mortgage companies: faulty screening, faulty disclosure/education to the purchaser, and just plain bad business practices. So now they need to be bailed out...Is it just me or have they never heard of the big picture.

I know Bush went on about securities, blah. Those investors should have looked at the numbers themselves. Someone, somewhere, dropped the ball looking at the numbers. It's called the snowball effect and every thing got sucked in during the roll downhill.

It seems to me home/land ownership has been promoted since the beginning of time--"40 acres and a mule," even earlier. I think when Columbus docked the boat there was a mention of the land and owning it.

In all seriousness, taxes have to choke up the dough. Again. Then there's the promise the money "much, if not all" will be returned. Paid back. Okay. When taxes go up it's been the very rare occasion they ever go down again. Even if they do go down, it's marginal.

I guess we're just to trust the government has it all under control.

Sorry, but I have to move to something else. The Presidential debate was scheduled for Friday. McCain wants to suspend it, and the campaign, to take care of these financial issues pending at the House. Good show!

I agree McCain and Obama should be a party to these discussions. Perhaps Obama is not seeing the big picture here.

There was an issue with McCain canceling his Letterman appearance. Well, what is more important, TV air time or our Nation's financial status? I did not see the Letterman show--it comes on too late for me. However, I read some of the stories about it. In my opinion the media really needs to get a life.

Yesterday evening Katie Couric did an interview with Palin...Why, oh why, could Palin not come up with one example of McCain's Maverick-ness. I'll tell you why. Those off the cuff shooting matches of questions and answers are tough. We cannot expect Palin to know every single incident of example.

I'm giving Palin credit here, sometimes I can't remember what happened yesterday. I honestly think Palin is thinking about the here and now rather than regurgitating the past.

All in all, we really need take our blinders off. For the campaign, it's really no secret who's favored by whom. One can really be swayed unless they look beyond what sits before them.

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  1. Excellent points all Muse!

    As for the bad lending practices?

    They actually go back the Carter Administration and the 1977 Community Reinvestment Act, whereby banks were mandated to give loans to people who would otherwise not qualify. In 1993 the Clinton Administration reinforced the act with provisions that would strip credit ratings from banks and mortgage companies who failed to meet quotas (among other penalties).

    In 2003, Bush attempted to get legislation introduced that would reform the laws and rein in Freddie and Fannie. Elizabeth Dole was the "foot soldier" who introduced the legislation in Senate committee.

    Charles Schumer was instrumental in getting it defeated in committee. Similar attempts via the House were stymied by Charles Rangel and Barney Frank.

    The Administration tried again in 2005 and 2007, but by this time the Republicans had no chance because in 2004 the Dems took the House, and in 2006 they took the Senate.

    The Dems and the mainstream media have amnesia on these events, but they are available for anyone who cares via the Library of Congress online.

    The ridiculous over-building of housing was, sooner or later, going to bring down home values, which in turn was going to cause loan defaults and write-downs that in turn killed the stock of mortgage companies.

    The root of all this evil was credit extended (via federal mandate) to those who had no business getting it.

    All this has a negative effect on the overall economy because money that would have been better spent by businesses got tied up in consumer loans. Combined with latent greed of so many Americans to "have it all now" we had all the makings of a disaster.

    We are now reaping the rewards of all this short-sightedness.

  2. Hi J.L!

    Agreed! It's funny how information gets glazed over and doctored up with whipped cream.

    I guess I'm growing up. I never paid much attention to what goes on in Washington or politics. Now with kids and their future at stake plus economic tragedy making our life miserable, I've become a convert.

    It's really taking a lot out of me though. I found a new wrinkle.

    I hope you have a great weekend!

    (or at least as good as it can be so far away from home.)

    Take care.

  3. Muse:

    I agree with both of you. I was in the mortgage business from 2001 until 2004 and Fannie mae just kept the new products coming. Low Doc, Stated Income, ARM's - and the underwriters were more than willing to fudge a little. But not too much. For instance, there was no way to get a Stated Income with a low credit score. We all knew that ARM's were the dangerous loans. But every client was duly warned of the potential for default. In fact, many banks would only give final approval at the fully indexed rate.

    In my opinion, the current economic problems can be traced directly to the Clinton Administration. Having said that, however, I support the current proposed bailout. The government can buy these deals for 10 cents on the dollar, hold them for a while and then sell them back to investors for 30 cents on the dollar. That's a nice profit, and everybody makes money. And the best part, of course, is that it won't cost the American tax payer a red cent.

    Great post.

    Happy trails.

  4. Hey Swu!

    Now that sounds like a great plan!

    Have a wonderful weekend!


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