Behind the Scenes - Potpourri

The Federal Reserve Board has rejected a request by the U.S. Treasury Secretary for a public review of the central banks' structure and governance because they feel it is a threat to their independence. Again, I think that 'transparency' is very important at this time in our country and this is a second attempt to prevent the public from seeing clearly, the first refusing to provide the list of banks receive government loans that I discussed in previous blogs.

The FDIC is looking at borrowing money from the big banks to get their funds to cover ongoing bank failures versus from the U.S. Treasury. Bankers and lobbyists strongly support this so there is a red flag here. This marriage is interesting in the respect that these banks have government loans and here is the government borrowing their own money in some respect. Does this make sense?

Also, on a similar subject, AIG's CEO has requested that the government trim the interest rate and extend the time to repay their loans back. And the government is actually considering it as reflected in the stock price. This example of taking care of the 'big' guy and letting the individual follow a less apealing path is inconsistent and another red flag.

As I mentioned in previous blogs, when the foreclosures reach bottom, then we know that recovery is underway in a practical sense, although in a statistical sense all the experts say that the recession is over. We know that the banks having been holding off putting foreclosed homes on the market, and they also have been holding back from foreclosing on delinquent mortgage holders. Given this delay, I see the housing recovery extending at least another year. And I saw that commercial real estate prices declined 1% in June and 5.1% in July; an overall decrease of 31% since last year. So this sector is now picking up steam and guess who holds the mortages; banks. Keep an eye on these statistics. It makes practical sense that this part of the real estate market will follow the path of the residential market. I won't be surprised if the government tries to intercede.

Watching the stock market barely moving up or down during this month, on a daily basis is very interesting. It is acting contrary to its historical past and I'm wondering what is going on behind the scenes.

Finally, I want to mention a subject that I usually don't. The top general in Afghanistan said that without more troops, the battle will be lost within a year. Ms. Clinton came out and pushed back against his warning and said that there are 'very expert military analysts who say the exact opposite'. The general also has been told by the Pentagon not to request troops. This situation creates much consternation for me as I lost high friends in the Vietnam war, so I have some experience with this kind of behavior by those who don't listen to those who are in the know. To be in the know, you have to experience it, then you move away from theory and opinions. I definitely think we should withdraw from that country. History shows that more troops is not the answer. Ask Russia. They spent years fighting in Afghanistan and finally withdrew because they could not win. Yes, they were there for a different reason, but it does not matter. This one time we can history and change the pattern of this country. Otherwise, history will be given the opportunity to repeat itself, and it seems that is what the human does.