Archive for December 19th, 2009
Hitting the road tomorrow until Christmas. Will try to post a couple of updates but in the mean time want to wish everyone a safe & Merry Christmas, and of course a Happy New Year too!
XMAS Lights on house
Amazing Christmas display with 176 channels and 45,000 lights! The show is so popular that it requires a crew of 3 people to manage the traffic.
OH, CRE (OH, COMMERCIAL REAL ESTATE):
The 12 Months Of Default:
Eliot Spitzer, Frank Partnoy and William Black write in the NY Times: Show Us the E-Mail
A.I.G. was at the center of the web of bad business judgments, opaque financial derivatives, failed economics and questionable political relationships that set off the economic cataclysm of the past two years. When A.I.G.’s financial products division collapsed — ultimately requiring a federal bailout of $180 billion — those who had been prospering from A.I.G.’s schemes scurried for taxpayer cover. Yet, more than a year after the rescue began, crucial questions remain unanswered. Who knew what, and when? Who benefited, and by exactly how much? Would A.I.G.’s counterparties have failed without taxpayer support?
The three of us, as experienced investigators and prosecutors of financial fraud, cannot answer these questions now. But we know where the answers are. They are in the trove of e-mail messages still backed up on A.I.G. servers, as well as in the key internal accounting documents and financial models generated by A.I.G. during the past decade. Before releasing its regulatory clutches, the government should insist that the company immediately make these materials public. By putting the evidence online, the government could establish a new form of “open source” investigation.
We would like to understand whether the leaders of A.I.G. understood that they were approaching a financial Armageddon … We would like to see how A.I.G. was able to pay huge bonuses to its officers based on the short-term income … We would also like to know what regulators knew, and what they did with the information they had obtained.
It is amazing that we still don’t have these answers – especially about the regulators, with an explanation of how the new process would have caught the AIG problems.
|But this does give me an excuse to repeat Eric’s great AIG cartoon!Click on cartoon for larger image in new window.
Cartoon from Eric G. Lewis
Bernanke misspoke in the recent TIME magazine interview:
TIME: Do you have a mortgage?
Bernanke: Oh, yes, we refinanced.
TIME: Oh, perfect. When?
Bernanke: About 5%. A couple of months ago.
TIME: Good time.
Bernanke: Yes. We had to do it because we had an adjustable rate mortgage and it exploded, so we had to.
TIME: So, did you get a fixed rate at 5%? I think this might be the most valuable piece of information. (Laughter.)
Bernanke: Thirty years fixed rate at a little over 5%.
Bernanke did have an adjustable rate mortgage, but it did not “explode”.
First, Dr. Bernanke is the Fed Chairman and “exploding” ARMs are a very important mortgage issue. So I think this topic is relevant and newsworthy (and Bernanke mentioned it).
Second, “explode” has a very clear meaning when discussing mortgages; it means that the borrower’s mortgage payment has increased sharply. An ARM can “explode” for two reasons:
1) The interest rate can reset to a much higher level. This isn’t much of a concern right now because the most common indexes like LIBOR are at very low levels and most loans are resetting lower.
2) The loan can recast. From Tanta on resets and recasts:
“Reset” refers to a rate change. “Recast” refers to a payment change. … “Recast” is really just a shorter word for “reamortize”: you take the new interest rate, the current balance, and the remaining term of the loan, and recalculate a new payment that will fully amortize the loan over the remaining term.
Neither applied to Bernanke. From the WSJ: Looking a Little Deeper at Bernanke’s Floating Rate Mortgage
The Fed chairman was in an adjustable rate mortgage with a rate that started at 4.125% in 2004 and adjusted after five years to a rate that would be 2.25 percentage points above one-year Libor, which as of the first reset date in June was a little more than one and a half percent. That suggest his costs wouldn’t be exploding now, as the interview suggested. In fact, they’d be going down.
So Bernanke refinanced into a loan with a higher interest rate and with a larger mortgage payment for the security of a fixed rate. This suggests he thinks fixed mortgage rates have bottomed (otherwise he could have paid less on his mortgage, at a 3.75% interest rate, and then refinanced next year). He did not “have to do it”.
Bill Still’s movie “The Secret of Oz” is a must see movie to understand the history of our money. His line, “It’s not WHAT backs our money, it’s WHO controls the QUANTITY” really opened my mind to the possibilities outlined below. My hope is that those who have not seen the movie yet will do so, it will give the ideas that follow more meaning. You can get his movie at the following link – “The Secret of Oz.”
Understanding our money and our economy is difficult, no doubt. There are a lot of pieces to the puzzle, but no piece is as perplexing and as troubling as backing our money with debt. I explain this everyday here at Economic Edge, it is at the root of our current and future problems. The “WHO” behind our money have used their self-generating debt money to influence politics to an unprecedented degree, thus the other main trunk of the problems’ root.
For quite some time I have seen the debt saturation and I could see where it is leading. Those places are dark places no one wants to visit. Without altering our current path I see much pain and historic events to follow. What I could not see until I really examined Bill’s line, was a way to get past the debt to a sustainable and prosperous system that works for the people going forward without crashing the world’s economy in the process! No easy feat, for sure! Most who understand the extent of the debt and how the math no longer works will likely say that it cannot be done.
It can be. The way to do it can be found in the outlines below. The key is repairing the root causes of the problem. The symptoms will then take care of themselves.
Still, it is no easy undertaking moving from a highly leveraged, debt saturated, and derivative entangled world to a prosperous future. That means that as you read these outlines you’ll have to think the parts through one at a time. Then ask yourself what each part means, what it does, and how it works in concert with the other elements of the proposal.
Over the past several weeks I have spent countless hours developing, tinkering, constructing, twisting, and sharing my thoughts with Bill Still and others to come up with these outlines. My full outline is now roughly 40 pages long – so much that I know the average person won’t even think about getting through it. So, I boiled all that down to its essence and developed what I call the “minimal” version below. It gives a very quick overview primarily of the monetary reform portion of the proposal. Hopefully it will motivate and inspire you, but I know it will leave you with many questions. That’s why I created the “medium” length version you’ll find below that. It will fill in the detail. I hope you will take the time to MAKE IT ALL THE WAY TO THE END. It will take some time, but I think you will find it worth it.
If you haven’t read the introduction to these proposals yet, I recommend that you do so either before or after you read the minimal outline below – FREEDOM’S VISION – Introduction…
FREEDOMS VISION OUTLINE – MINIMUM:
Artwork by AZ Rainman
*To PRINT, click “download” then “open” to open in your .pdf viewer where you can either save or print. Printing directly from the Sbribd menu may not produce good results.
FREEDOM’S VISION OUTLINE:
Artwork by AZ Rainman
These are called the American Party Papers or Freedom’s Vision. The hope is that they explain the basis for change in the same way that the Federalist Papers did when Hamilton and Madison were exchanging ideas about the Constitution. Thus, we await and welcome your ideas, and even your criticisms. In fact, we thrive on it! Each hole you find, each recommendation, works to make it that much more bullet proof. And no, we don’t have all the answers and we’ve left enough room for other experts to weigh in, to take ownership of a piece of the program.
I have some audio coming in the next few days to help further explain the thinking and to add additional background. Please check back for those, I’ll post links in the Freedom’s Vision spot in the upper right hand corner of this site. By the way, there’s a new web site on the way dedicated to the implementation of these proposals. It will also play the part of SWARM central!
EVERYONE is a part of the solution! We all have a role to fill in creating a stable and prosperous future, even if that role is simply part
icipating in the “SWARMS” that are coming.
If you recognize the need for change and see these proposals as a way forward, I would ask that you please take it to the next step. No one is going to do it for you, it is you, it is me. WE must all take ACTION. The action you can take is to volunteer your time to help organize others, to go out onto the web and link these proposals for others to see. To directly ask other bloggers, organizations, and media to support these proposals and to spread the word. We need them to go viral, we need to organize, and we need to get the swarms focused on their targets, one state, and one politician at a time.
Eva Cassidy – Somewhere over the Rainbow: