Perspective

Now that healthcare has passed with the President's signature, time to stand back and take a more expansive perspective. There is no doubt that the time has arrived for this country to experience a change. The president and congress symbolize this by passing healthcare in the current form. The positive is that those who have been complacent and letting others rule their lives have been pushed to action. This is what allows democracy to be strong, having its citizens be active participants in the ruling process. As time passes, we will experience what is in this healthcare bill. There is no one person who understands the breadth and scope of its impact. As it unfolds, use the impact to scrutinize your own life to see if you are living in a way that best serves you, your family, your relatives, and this planet. Stand up for what is important to you and your life path. If you don't know what that is, use this legislation as a signpost to point the way.

Again, I commend Google for not participating in China's censoring of its people. I welcome those companies and people who put their integrity before money and profits when there is a conflict between the two.

A new wrinkle to the housing market which has yet to reach bottom is Bank of America taking the lead to reduce the principle amount of mortgages of struggling home owners up to 30 % of the principle of the mortgage. I am sure other banks will follow their lead. Watch the FDIC. They closed 7 banks last Friday; the highest weekly rate of closures this year. Momentum is under way.

U.S. Credit Rating, Google, FDIC

This country's credit rating is more in the news now and seems to be reaching the point of being downgraded, something I have mentioned in this blog as a major concern. With a downgrade, borrowing money will cost more. I think that if this healthcare bill passes without a balance of liberal and conservatives participation, it will create enough financial uncertainty to receive the downgrade at a time when it is unaffordable.

I commend Google for standing up to China's 'censorship standards'. Today, an article mentioned that the company is 99.9% certain it will withdraw from China. With this action, I think that it will definitely have an affect on China's policies in this area because they do want to keep on the edge of technology. Google is like Microsoft, effective in facing the opposition of countries.

The F.D.I.C. is closing several banks a week. They usually announce it on Fridays. Remember, the 'toxic assets' are still on the books. With the market-to-market accounting rule lifted, the banks no longer are reflecting the true value of them by decreasing the asset values on the the financial sheets. This is the primary makeup of the foundations of the big banks like Citigroup, B of A, J P Morgan, Wells Fargo, and the like. Notice these were bailed out and the other banks are simply closed with the assets transferred to the F.D.I.C. for a fire sale in most cases.

Be sure to vote. That is the most effective way to make a difference if you want a change in how the country's government is operating.

Federal Government's Return on Investment, Google

The FDIC sold $1 billion of troubled loans from 22 banks that failed in the last 2 years to the highest bidder for $90.5 million. The portfolio are commercial real estate loans that are 70% delinquent. That means 30% are not late. Seems like a great deal for the buyer.

Paul Volker, the fed chairman in the 1980s who pulled us through a high inflationary time said that Wall Street i.e. banks, had 40% of all the profits in the country and its contribution to the welfare of the country doe not approach that. Today, the president said he is going to tax the banks billions of dollars. Remember these banks are profit motivated so this tax will be passed on to us, who use these banks.

Google's founders appear to have put integrity as a priority over profits since they are threatening to pull out of China in defense of free speech and its users' privacy rights, after hackers from China tried to get into activists email accounts. China said Google must abide by China's laws. It will be interesting to see if Google follows through or China changes its policy.

Another interesting statistic is that 1 in 45 households received a foreclosure notice in 2009; 2.8 million homeowners. With that ratio, I'm sure we all know someone who has or had this challenge on their path.

Interesting Pointers to Start 2010

Some interesting threads that provide insight for this year:

* The FDIC is going to double its staff, adding 1600 people. It handled the closure of 150 banks in 2009. I would estimate they plan on closing at least 400 banks this year. Commercial foreclosures this year will definitely have a huge impact on the vulnerable banks. There's a current 10.6% vacancy rate.

* Foreclosures on Trulia continue to be the majority of new home listings in the areas that I track.

* The Public Pension Fund has a $2 trillion deficit and they don't use market-to-market accounting, so the assets are over-inflated and the deficit is bigger than being reported.

* Chris Dodd's retirement after over 30 years in congress is unsettling. I think it goes beyond the fact that he may not get reelected. Keep an eye to see what unfolds.

* The 'behind closed doors' health care negotiations is so contrary to our system and nonsensical that it stands out. Even more so now that the head of CSPAN has asked to be put the cameras in place to record what is happening for public view. Again, as I have said before, this seems to be a one-term president for continuing to allow this kind of behavior.

New Era to balance materialism with other important aspects of life

We seem to be entering a new era. Expectations need to be readjusted. What lies ahead is a positive because we need to contract to balance out the excesses and sweep away the dead matter. I trust that delaying it through government intervention is to help us collectively be prepared. What may seem bad is a healthy cleansing and correction of our patterns so humanity can be uplifted. We can clearly see how the burden of debt affects companies, individuals, and so on. It's time to start to move away from materialism as the 'only' focus and allow a higher quality of life on a nonmaterial level. We can only see this new path by losing the material aspects that have controlled our lives.

The stock market is staying buoyant from company earnings exceeding expectations. Keep in mind they have trimmed their employee base to do this and the numbers are reflected in the unemployed. There needs to be a focus on the small businesses in encouraging them to take the responsibility in creating jobs. There are incentives to support this, but our leaders are moving in the opposite direction; still looking as to how the government can create the jobs.

The contraction of consumer spending is very good. Including savings as a part of our personal budgeting process is essential. We need to look at how to export more goods and services to consumers in other countries instead of relying on us to do the buying.

Deficit spending is on the increase as Mr. Geithner tells the world a strong dollar is important which means reining in our spending and increasing interest rates. We continue in the opposite direction. I know they are waiting for the right timing, but I think that when we arrive to what that is we shall see the error of our ways, and it will be too late in that we will have to experience the magnitude of that mistake.

FHA, the government controlled housing lender needs a bailout. Add them to the list with the others like FRE, FNM and so on that I have mentioned before. This is another marker to see that foreclosures and the housing foundation is still trying to find a bottom.

The FDIC has run out of money i.e. insolvent. They now have ordered the banks to 'prepay' $45B to keep them in business of closing down 'insolvent' banks. The banks with the biggest bill received the most TARP money. I look at this as a creative accounting action of the government borrowing from the government in an indirect way.

I'm smiling as I write this. And I'm glad to be around for this part of the world's journey. :) :)

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.

A Beacon of Light in the Darkness

Paulson's statement of not buying toxic mortgages was great to hear today, especially since I was opposed to the $700B bailout.  This move is in the direction that I am moving myself, away from debt.  The focus needs to be at the bottom, helping people refinance.

The market managed to stay above 8,000 which I use as a measurement stick for stability.  Another fact to note when you hear that this crisis is the worst since the depression is the employment numbers.  Keep in mind that unemployment is 6.5% and will get larger.  But in the early 1930s unemployment was 25.6%, and the early 1980s 10.8%.  It's true that the cause of this recession and unemployment is different than the past, but historically 'bubbles' do pop and we get to experience the downside.  I think since the world is now tied together in one financial web, it creates more fear and hysteria than before.  That is the unknown as far as what lies ahead.  How effective are we as a country in working with all the other countries who economies are tied into ours?  We are finding this out step-by-step.

I have been watching the insurers AIG, GNW, and MBI and can see that based on the stock price movement, more government action will be needed beyond The $145B loan to AIG.

And the big three automakers, GM, Ford, and Chrysler should NOT be bailed out without wholesale changes.  GM and Chrysler should be combined to save on overhead, management, and general and administrative costs.  All of them should reduce the price of their vehicles to recapture costs only for a defined period of time to keep the cash flowing.  Doing business the same way means more bailout money required.  There should be an accounting of what has been planned and accomplished according to this plan with the $25B they have already received from the government.  Rescuing without a comprehensive radical change in the way they do business is only delaying the inevitable.  With 1 in 10 jobs being at risk, it is even more critical to act in a manner that is decisive to stop the cash hemorrhaging.  

Another item of interest today was GE has been backed by the FDIC for $139B of their capital debt.  Look at how fast this $700B is being spent.  Do we really have an understanding of how much money has been loaned in total beyond the $700B approved by Congress?  It has to be in the trillions.

FDIC seizure of WM and the attempt to seize WB for City

I am fired up after researching the latest actions of the FDIC.  I sent the following email to the FDIC:

Dear Manager of the FDIC,

As a former accountant and long-standing member of the National Association of Accountants, I am writing to give you my impression of what you are reflecting with your actions on the subject companies.

Washington Mutual was seized and given to JP Morgan for $1.9B.  WM had more in cash than that.  JP was given this company.  How can you rationalize this transaction?  Now WM is attempting to retrieve their $5B in cash from JP through bankruptcy court.

Then today with Wells Fargo offering $15B for Wachovia after your attempt to seize it and sell it to Citi for $2B, it is clear that there is no objectivity in your organization.  Now Citi is saying that Wells Fargo cannot purchase Wachovia because they have 'exclusivity' from the FDIC.  I think that there is collusion going on between the FDIC and the benefiting companies.  This is anti-capitalism and certainly not democratic.  I am questioning the legality of your actions.

Please respond to this email and let me know what your view is.  I intend to pursue what I have written here.  There is an abuse of power on part of your organization.  Thank you in advance for your time.  Sincerely, Shirley R. Tamez

I also sent a copy to Wolf Blitzer at CNN, Bill O'Reilly, and Rush Limbaugh to see if I can get this information out into the open in a way where it will be publicized to the mainstream.

One other area that alarms me is with the Financial Accounting Standards Board (FASB). I consider them the backbone of this financial system that this country uses.  Wall Street pressed Congress to ease a FASB rule that deals with valuing assets at current market value.  This was included the bailout bill that was passed by Senate and House.  It gives the SEC authority to suspend the mark-to-market accounting.  It's  a fair-value accounting standard and changing the rule allows companies to obscure the true market value of their assets.  In the 1990s, the FASB wanted to force companies to expense the millions of stock-options on their books that they were issuing to employees.  Big muscle pressure forced them to back down.  10 years later, following the collapse of Enron and Worldcom, this ruling was put in place.  Allowing Congress to yield to these companies who want to revalue their assets takes away from the authenticity and reality of our financial system.  This organization is critical to ensuring that those who have self-interests are not allowed to obscure or distort financial information in their favor.  As you can see from the examples, this group provides what a C.P.A. firm does, but on a much larger scale in that the FASB originates the rules, while the former ensures they are followed.  I see this as a signpost of the unraveling of our capitalistic society because Congress is influenced by the few and is not looking out for the majority.

Washington Mutual Takeover

Yesterday, I sent messages to Roy Blunt (House Minority Whip), Richard Shelby(against bailout), plus Feinstein, Boxer,  Herger, and Wolf Blitzer at CNN regarding the government taking over Washington Mutual and how it is in stark contrast to what the House Republicans want using private investment versus taxpayer money to help the financial sector.  This is what I wrote specifically to Mr. Shelby:

"Last night's (9/25) FDIC takeover of Washington Mutual was an action that is in contrast to what the Republicans are recommending on this bailout; that private investment should be encouraged versus taxpayer money.  In March, a private investment group invested $8B in Washington Mutual.  Today that investment is worth practically nothing as well as for the individual investor.  Why was the biggest thrift with over $300B in assets taken over in this format?  What foresight or consideration was given in comparison to what is being recommended?  I see lack of continuity with what the Feds are doing and what Congress is saying.  That is the primary reason for the distrust with the average citizen.  I am glad there is such a turnout protesting this bailout all across the nation.

Also, the current Washington Mutual CEO has been on the job for 16 days and has a severance package of $19M.  THe previous CEO left with $57M. This kind of reward has no bearing on the actual performance and thus again, another reason to look at Washington as being out-of-touch with reality.

In an earlier email to my congress representatives this week, I indicated my opposition to the bailout plan and why.  More debt of that magnitude added to the already enormous debt load makes us weaker as a nation and provides less room to maneuver with the world.  I think the market forces should be allowed to take the path that corrects the excess in the housing market.  Yes, it is painful, but the pain will be much shorter than trying to come up with a plan that will only delay the inevitable. And those of us alive today should bear the brunt of this fall: not our children, grandchildren, and those to come.  Thank you for considering my view."