The mortgage plan is revealed

U.S. Sets Rules for Mortgage Modifications, 2% Mortgages

March 4 (Bloomberg) -- The Obama administration set loan modification guidelines for its $75 billion homeowner rescue plan, agreeing to pay lenders for altering troubled mortgages while reducing borrowers’ interest rates to as low as 2 percent.

2 percent? sign me up! Sadly, I do not think I'll qualify, as I am current in my mortgage payments and have chosen to not live beyond my means. However I am troubled by all of this government intervention in the mortgage market. Though I don't think that's the kind of "troubled mortgage" candidate they're looking for.

Geithner to fight himself; Obama channels Jim Cramer

Everytime I see Treasury Sec Geithner's mug on TV, this is how I envision him:


Geithner: Obama to fight international tax dodgers

WASHINGTON (AP) - President Barack Obama's Treasury secretary says the administration will unveil a series of rules and measures in the coming months to limit the ability of international companies to avoid U.S. taxes.

U.S. Bailout, Stimulus Pledges Total $11.6 Trillion

All information culled from Bloomberg:

The following table details how the U.S. government has pledged more than $11.6 trillion on behalf of American taxpayers over the past 19 months, according to data compiled by Bloomberg.

Changes from the previous table, published Feb. 9, include a $787 billion economic stimulus package. The Federal Reserve has new lending commitments totaling $1.8 trillion. It expanded the Term Asset-Backed Lending Facility, or TALF, by $800 billion to $1 trillion and announced a $1 trillion Public-Private Investment Fund to buy troubled assets from banks.

MBA, CFA, BFD

"MBA, CFA, BFD."

I once had a boss that used that phrase anytime some greenhorn equity salesman would try to impress him with their spit-shined education credentials. I always got a kick out of that, especially since he was a CFA chartholder himself, and several of my colleagues had either an MBA, a CFA or both. He was a cynical man

It is done

It looks like both houses of Congress have agreed to the 1,000+ page, $787,000,000,000 "stimulus" package that is going to save our country from the abyss.

Before you accuse our elected officials of vigorously scratching the itch to spend our children's money, remember, it could have been worse:

The nonpartisan Congressional Budget Office said the stimulus package will cost $787 billion, rather than $789 billion lawmakers estimated earlier this week.

That is what passes as fiscal responsibility on Capitol Hill.

And this, from San Francisco's favorite carpetbagging daughter:

“The jobs the American people care about most -- their own -- will be dramatically safer the day that President Obama signs this plan into law,” said House Speaker Nancy Pelosi, a California Democrat.

The United States of Insolvency

This chart caught my eye over the weekend (from the Economist):

The biggest force behind the bond-market shock is the onslaught of new issuance as the government seeks to finance the gaping budget deficit, Fed liquidity programmes, mortgage purchases and bank bail-outs. Yields moved still higher this week partly on the Treasury’s

The time warp is stuck on continuous play

Trivia time! Guess the year of the following headline:

Fannie Mae to Loosen Rules for Home-Loan Refinancing

a) 1989
b) 1999
c) 2009

If you guessed "C" give yourself a prize!

From the article:

Feb. 5 (Bloomberg) -- Fannie Mae, the mortgage-finance company under government control, will loosen rules for homeowners seeking to lower their loan payments by refinancing.

Government front running

This is what happens when government front runs the private sector:

The notion of too big to fail

The following bubble chart compares the current market capitalization of our nation's biggest banks to what they were in the second quarter of 2007:

The chart is a little fuzzy, but the blue bubble represents Q2'07 and the green bubble represents Q1'09 YTD. The giant bubble with the tiny inset bubble that looks like the earth against the sun is Citigroup.

Keynesian Economics and Venezuelan Amerindians

Barron's takes a dig at Keynesian economics:

IN FACT, HALF A LOAF COULD BE BETTER FOR the economy, and better for Obama's ultimate treatment in the history books, not to mention his re-election odds. A $500 billion package -- say, 60% tax cuts and 40% increased spending -- could realize his stated aim of spending money wisely, while providing significant fiscal stimulus.One reason for caution is that priming the pump never quite works the way the textbooks say it should. The economy's lifeblood isn't consumer demand, but rather credit, both for the financing of business investment and the purchase of consumer durables like cars. No amount of fiscal stimulus will make much difference if credit is constricted. If credit is available, jobs and higher incomes will follow.

Posted so as not to be lost for posterity

Here are what I feel are the two most clearly written pieces I have read on the causes of the current economic crisis.

The first, Deciphering the Liquidity and Credit Crunch 2007-08, explains in simple terms the financial causes of our current predicament.

The second, Anatomy of a Trainwreck, explores both the political and the financial causes.

A trillion is the new billion

“Never confuse motion with action.” --Ben Franklin

This simple wisdom is apparently beyond the understanding of our elected leaders as demonstrated by the following headline:

Obama Warns of Irreversible Decline Without Action

Jan. 8 (Bloomberg) -- President-elect Barack Obama warned that without immediate steps by the government to revive the economy, family incomes will drop, the unemployment rate could reach “double digits” and the U.S. risks losing a “generation of potential and promise.”

Closing the barn door after the horse has escaped

There are those that feel if only there was more government regulation we'd not be in the financial mess we're currently in. The problem with regulation is that like most legislation, it is a fairly blunt instrument with which to try to fix a specific problem, and it is not uncommon to find instances where the unintended consequences outnumber the intended consequences--often significantly. The Sarbanes-Oxley Act of 2002 (Sarbox) is a perfect example. Put in place with the intention of halting further accounting scandals like the ones that brought down Enron, WorldCom, Tyco and a host of other publicly traded companies, it has also acted to limit the choices a small business has regarding its growth and has moved most of what was left of our IPO market

Dominos falling

Here's The Cato Institute sharing a little bit of common sense:

Daniel Mitchell, a senior fellow at the libertarian Cato Institute, said the government should have no role in helping the (auto) industry, except to provide positive economic conditions -- "a lower corporate tax rate, less red tape and things like that," he said.

Mitchell added that if the government takes control of the auto industry, it will be a recipe for disaster.

"The free markets allocate resources and reward people for doing good things and punish them for doing dumb things," he said. "Government misallocates resources and rewards people for doing dumb things and punishing them for doing good things.

Federal Reserve Liquidity Programs to Date

Every industry has its share of acronyms, but unless one is a part of a particular industry, specific acronyms generally have no meaning. Since it is our money being used in the latest iteration of the current corporate/social bailout, I believe every taxpayer should take an interest in the list below.