Here's the Best Explanation

With regards to the current financial situation, this is the best, most succinct explanation I've read as to its cause.

Economist Jeffrey Miron says the bailout plan presented to Congress was the wrong solution to the crisis

Editor's note: Jeffrey A. Miron is senior lecturer in economics at Harvard University. A Libertarian, he was one of 166 academic economists who signed a letter to congressional leaders last week opposing the government bailout plan.

CAMBRIDGE, Massachusetts (CNN) -- Congress has balked at the Bush administration's proposed $700 billion bailout of Wall Street. Under this plan, the Treasury would have bought the "troubled assets" of financial institutions in an attempt to avoid economic meltdown.

This bailout was a terrible idea. Here's why.

The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.

Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.

This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle.

Once housing prices declined and economic conditions worsened, defaults and delinquencies soared, leaving the industry holding large amounts of severely depreciated mortgage assets.

The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

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Miron suggests that the answer to the problem is bankruptcy, not bailout. His reasons can be read here: www.cnn.com

Bailout in Jeopardy

There's gridlock in Washington over the bailout of financial institutions.

I can't say I'm disappointed, and I can't say I'm happy. I don't want a bailout, but I'm not so sure I want the fallout from no bailout either.

As with any bill that involves a large sum of money, the party in control of Congress wants to give away the store and bail out people who took out mortgages they had no business taking out. And, inexplicably, the President seems to be in the same generosity boat. I wonder about George Bush's principles some times.

You know, it was the attitude of "I want me some of that action" that got us here in the first place. That same attitude will always raise its tempting head in times of irrational market bubbles. It's a mob mentality that is driven, in part, by the fear of missing out on the cookies sitting on the table, no matter how poisonous they may end up being. I guess it's human nature, but what is dismaying about it is that the so called experts with cooler heads who should know better (insert your own cliche) seem to be taken in by it as well.

It's about greed, of course. It's about insane profit and power positioning.

I emailed my brokerage, Scottrade, to ask them about their exposure to the financial meltdown.

This was their response:

Dear Mr. Howe,

Thanks for your email. Scottrade has no exposure to any derivatives, or mortgage backed securities. Scottrade invests free cash balances in treasury types of securities. You may view our audited financials at www.scottradefinancials.com.

Then the email went on to talk about SIPC and whatnot. But I was pleased to see that Scottrade, more than anything else, maintained a clear thinking, principled position with regards to how it manages its free cash balances.

With regards to solutions, I received this email, and it seems like a pretty good idea to me.

The Birk Economic Recovery Plan

Hi Pals,

I'm against the $85,000,000,000.00 bailout of AIG.

Instead, I'm in favor of giving $85,000,000,000 to America in a 'We Deserve It Dividend'.

To make the math simple, let's assume there are 200,000,000 bon-a-fide U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..

So divide 200 million adults 18+ into $85 billon that equals $425,000.00.

My plan is to give $425,000 to every person 18+ as a 'We Deserve It Dividend'.

Of course, it would NOT be tax free. So let's assume a tax rate of 30%.

Every individual 18+ has to pay $127,500.00 in taxes. That sends $25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500.00 in their pocket. A husband and wife has $595,000.00.

What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage - housing crisis solved.
Repay college loans - what a great boost to new grads
Put away money for college - it'll be there
Save in a bank - create money to loan to entrepreneurs.
Buy a new car - create jobs
Invest in the market - capital drives growth
Pay for your parent's medical insurance - health care improves
Enable Deadbeat Dads to come clean - or else

Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. Of course this is also for those serving in our Armed Forces.

If we're going to re-distribute wealth let's really do it...instead of trickling out a puny $1000.00 ( "vote buy" ) economic incentive that is being proposed by one of our candidates for President.

If we're going to do an $85 billion bailout, let's bail out every adult U S Citizen 18+!

As for AIG - liquidate it.
Sell off its parts.
Let American General go back to being American General.
Sell off the real estate.
Let the private sector bargain hunters cut it up and clean it up.

Here's my rationale. We deserve it and AIG doesn't.

Sure it's a crazy idea that can "never work."

But can you imagine the Coast-To-Coast Block Party!

How do you spell Economic Boom?

I trust my fellow adult Americans to know how to use the $85 Billion 'We Deserve It Dividend' more than I do the geniuses at AIG or in Washington DC .

And remember, The Birk plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.

Ahhh...I feel so much better getting that off my chest.

Kindest personal regards,

PS: Feel free to pass this along to your pals as it's either good for a laugh or a tear or a very sobering thought on how to best use $85 Billion!!

Anyway, be prepared for rough waters still to come. We ain't out of the woods by any shot of the imagination. Best wishes to you and your financial survival.

This SHOULD Be all Voters Need to Know

Throughout his political career, Barack Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Chris Dodd, the Senate Banking Committee chairman, who received more than $165,000.

From Bloomberg.com Article

Unfortunately, voters don't really care about things like this, do they?

This is Getting Funny

I, like many others, have received numerous emails from Nigeria, Ocean Bank, Gabon and so on, all purporting to want to send me millions of dollars or have me share in millions of dollars of tied up funds simply by becoming a conduit. They are, of course, scam emails. I just delete them, usually without reading them.

However, I happened to read down through this one and found it humorous (not that the writer was trying to be) for the effort the scammers are putting forth trying to conjure up a different angle. Here is the email in its entirety:


Federal Ministry of Finance.
Directorate of International Payment.
Liaison Office - Africa.

This email is to notify you about the release of your outstanding payment which is truly $4.7 million. The Federal Government scheduled a time frame to settle all foreign debts which includes Contract/Inheritance/Gambling/Lottery and other internal loans. News had it that over the past, numerous individual(s) who happen to be impostors (claiming to be individuals, banks and organizations) are claiming to release numerous sums of fund via numerous ways.

With the help of the Economic and Financial Crimes Commission we have noticed that you have being asked to pay outrageous amount of money by these impostors for the transfer of your funds to you. We want you to stop all communication that has to do with these fraudsters who have been requesting unreasonable sums of money from you to release your funds which they do not have access to.

We have received a mandate and instructions of the President, Federal Republic of Nigeria: Umaru Yar'Adua (GCFR) together with the EFCC Nigeria, and the Federal Bureau of Investigation to commence the immediate release of your funds through one of the following payment options stated below depending on your choice:

1. Payment via Automatic Teller Machine (ATM card): This where you
will be sent an Automatic Teller Machine card also known as ATM card
(Debit Card issued by MasterCard). Upon receipt of your ATM card you
will be allowed to withdraw $10,000.00 per day by default and you are
given the option to increase the withdrawal limit of your card to a
range of $20,000.00 if you want.

2. Certified Cashiers Check or Bank Draft: In this case you will be
sent a certified bank draft or check signed in your favor which you
will deposit in your bank for it to be cleared within 3 to 5 working
days at most depending on your bank.

You are advised to select one out of the two options on how you wish
to receive your $4.7 million. Your ATM card or Check/Bank Draft will
be shipped via Fedex Shipping Company and would get to you within 2
to 3 working days at most.

DO NOT SEND MONEY TO ANYONE UNTIL YOU READ THIS: The actual fees for shipping your ATM card is $96.99 but because Fedex have temporarily discontinued the C.O.D which gives you the chance to pay when package is delivered for international shipping as stated on their website:
http://fedex.com/us/international/irc/profiles/irc_ng_profile.html?gtmcc=us#C10

We had to sign contract with them for bulk shipping which makes the fees reduce from the actual $96.99 to $73.95 nothing more and no hidden fees of any sort!

You are advised to contact the dispatch officer responsible for the shipping of your Check or ATM card with the following information for shipping of your payment Check or ATM card.

Dispatch Officer: Michael Grizla
Email: michaelgrizla@gmail.com
Tel: +234-234-702-638-5998 and 011-234-702-638-5998

And provide him with the following information:

Your full Name...
Your Address:................
Home/Cell Phone:...................
Preferred Payment Method (Check or ATM):................

The dispatch officer will provide you with instructions on how you are to make payment of the $73.95 only for the shipping of your ATM card or Cashiers Check.

This measure is intended to stop the impostors you have erroneously been dealing with. You are to adhere strictly to the instructions above for more information contact the dispatch officer.

Remember that you are not paying any fees extra no matter what. Once again note that the actual Fedex Retail Price: $96.99 Your Price (Because of our contract signed): $73.95 ($23.04 Savings!).

Yours sincerely,
Mr. Jerry Lisbon
Cc: Senate President
Cc: All Foreign Payment Offices


Note: don't ever reply to emails like this. Delete them right away.

The Media Never Ceases to Boggle...

A news promo on a local talk station just announced,

"Vice Presidential candidate, Sarah Palin, has the Republicans wildly enthusiastic about her. Not so with the Democrats. Story coming up..."

How the $@$#@#$ is this a news story? Huh? Can someone tell me?
When have Democrats ever been enthusiastic about a Republican candidate? And when have Republicans ever been enthusiastic about a Democrat candidate?

Yet, they announce it with all seriousness as if it was a real teaser.

The media has such a patronizing view of its listener/reader/viewership.
They don't even bother to camouflage their arrogance.

Give me a fricken break, WGAN of Portland, Maine.

In other awesomely obvious breaking news:

OPRAH REFUSES: PALIN WON'T BE ON
and
Obama-backer [Annette] Bening pillories Palin
____________________________________________________

On a totally different note:

I think people who decide to go into politics should be required to have spent at least five years working in the private sector AND they should be required to spend at least three years in the military.