Stimulus & Economy Snapshot 04/11/09

March Record Budget Deficit Over $192 Billion

The budget deficit shot up $192.3 billion in March nearing $1 trillion according to numbers released by the Treasury.  We’re only halfway through the budget year but the cost of Stimulus, Bailouts and the Recession (Depression) soar.  The deficit shot up over $42 Billion more than expected say economists.  The deficit soared over $42 Billion more than leading economists expected.  It’s already over $956 Billion the first six months of the budget period which is also in record territory.  Obama’s people project a deficit topping $1.75 trillion by the end of the budget year. (About 4 times the record deficit of the previous budget year)

Nearly $300 billion went to the nation’s banks and other companies to deal with the financial disaster.  But millions of homeowners still lost their homes!  Where the hell did the money go and for what purpose?  It didn’t pay off these loans and let people keep their homes that’s for sure.  Wells Fargo reported a tremendous profit for the first quarter this year.  They also received billions in cash from the bailout.  So the money went to save the bank, the investors, the note holders and the instrument writers and guarantors.  The homeowners lost their home, the bank holds the hard assest and sells it for the cash, the bank has the money from the Fed to replace that which it was losing due to default, but the property is taken over, the loss was on paper and the only one losing is the homeowner.  The bankers have cash in BOTH fists!  One from the Fed and the other from the assets it took and sold.  Some one is getting screwed and it’s not the financial moguls that caused the problems and have their hands out.  It’s the Homeowner and the American Taxpayer.  How else can you explain a bank that goes from the verge of bankruptcy and losing billions of dollars to a total turn around and billions in PROFIT in just a few short months?

In addition to all that in the bailout fund, another $46 Billion was pumped into Fannie Mae and Freddie Mac last month.  So far about $60 billion since October has been injected into these agencies.  I say agencies because they were both taken over by the government late last year after they had combined losses in the billions of dollars on mortgage loans.  So somehow the private sector bank can turn around into a profit in a few months but the fed is still running at a loss with it’s own lending agencies?  Something smells here.

In all over $700 billion of bailout funds Congress approved has disappeared into corporate coffers.  Primarily to banks, although insurance giant American International Group Inc. and auto companies General Motors Corp. and Chrysler LLC also have received assistance.  Funds also were and are being dispersed to states for billions of dollars for all the “approved” programs.  Some went to the public to be realized mostly through this year and off into next year in tiny drops for the average American Budget. 

 

Still In A Classic Depression Economy 

Take a look around!  People are STILL losing their jobs and homes.  Businesses are still closing up and cutting back.  Unemployment is still climbing as well.  Growth is reversed and production is way down as is consumption.  Yet prices are not declining much, in some cases they are climbing.  While consumers have MUCH less on average to spend today, the cost of living has not dropped creating a larger gap than before.  Credit would be utilized to fill in the gap until things could equalize.  But there is very little credit available.  Many consumers have had credit lines reduced or cut off entirely so now there is nothing to help fill the gap to get through this fiasco.  Recessionary times with inflationary markets, choked off money supply, asset base depletion all this is pointing to depression. 

The fed is creating a potential huge monster bubble in the US dollar.  Borrowing now, underwriting the economy but getting very little ROI and revenues are shrinking.  Tax revenues totaled $989.8 billion which is down 13.6 percent from a year-ago same period.  Since World War II this is the longest “recessionary period” every recorded.  The downturn began in December 2007 according to some pundits.  According to my writings I first noticed a “downtrend” in the fall of 2007 around September/October.

 

Some Bailout Money Trickles Through To The Public

At least some of the billions from the stimulus plan is finding it’s way to the general public where it’s needed.  While the numbers seem high, for the teeming masses it is meant to serve, it is a literal drop in the bucket.  Medicaid, Medicare, Unemployment Benefits and Food Stamps are ways the fed is getting it down to the people along with some tax breaks. 

The Treasury also reported benefit payments from the unemployment trust fund totaled $44.6 billion so far this budget year which is up from $19.4 billion last year.  However, it should be noted that this isn’t a lot of new money from the stimulus plan going to the people at all.  The majority of it is coming out of the unemployment trust fund which was already in existence and heavily funded by employer contributions (payments by the employer) to the fund. 

 

Obama’s False Claims

Just a couple months ago Obama put forth his budget proposals and told the American public we would have a $7 Trillion deficit over the next 10 years.  Yes, you read that right, TRILLION! 

However, last month, only a month after Obama’s budget proposals were put out, the Congressional Budget Office estimated that Obama’s budget proposals would produce $9.3 trillion in deficits over the next decade.  This is $2.3 trillion MORE than Obama said it would cost.  The CBO said Obama’s budget will cause deficits around $1 trillion annually through to the end of the year in 2019.

The administration still says it is confident its claims are accurate and the presumed declining deficits over that same period could be achieved.   The thought is nice, but that is exactly opposite of what is happening and has happened in the past.  Private economists feel those claims are false due to the fact that those estimates are relying on faulty economic assumptions believed to be too optimistic.

 

Expect War

While it has been typically a Republican tool, the Dems are going to have no choice.  For all his peace spouting propaganda and trying to get in bed with the muslim world, Barack is going to have to adjust his thinking and his actions to real world facts.

War generally follows economic turmoil and a period of prosperity follows caused in part by the war machine economics then in the rebuild post war feel good and happy economy.  Bush AND his daddy screwed that up.  Not realizing how far reaching and long lasting a war has to be to recieve the same historic stimulus and economic boon of prior wars they fell far short of requirements with the Iraq campaigns.  Desert Storm and Desert Shield both fell short of completing and worthwhile goals.  The current effort was a waste of Amercian Life and resources and did nothing in the grand scheme of things.  The first Bush attempt was the most succesful but in the wake of the event the combination of cutting it short and then stepping in too fast too much in inflationary moves which was continued through into Juniors years just messed up the economy.

Things were moving forward and they kept killing the goose toying with numbers and supply until the economy became confused, wary and just gave up deciding to stagnate then crash in the end.  The government is now stepping in trying to shore up the collapse and stabilize it to grow.  But the fools are already talking about raising rates and we are not even in the first stage of recovery yet still seeing declines across the board.

To take focus off of internal screw ups the administration will have to shift focus.  It’s already taking protective steps and shifting focus saying they have nothing to do with todays problems, they are just trying to fix it.  That isn’t going to work.  Obama SHOULD know that the only way the economy is going to turn get attention off of his office is to get the people behind him in some thing and to be looking elsewhere. 

A war will create jobs, increase production, free up the money supply and stimulate a lot of action and movement.  Industry will vastly increase over it’s near standstill level and consumers will again be able to consume.  When the war is over and “Johnny/Jenny Comes Marching Home Again” it will be hurrah time.  Families reunite, new ones start, baby boom, more work, more services, more money, etc…

But in reality, for it to work, it has to be a sizable war of real duration.  It can’t be some “Storm Trooper Operation” police action quick snatch and grab go in , destroy, leave.  Nor can it be some ill conceived plan without a clear goal and become drawn out over time without any discernible benefit or goal being accomplished either.

Afghanistan, Iran, Iraq, these postage stamp pipsqueak events aren’t going to do the trick.  There is a lot of saber rattling going on over the Korean arena….

Not that I condone war or hope it would occur mind you.  It’s just that it is what politicians think they have to turn to in order to take care of their problems.  The real truth is if they honored their promises to the people and if they did the right things and spent money the way it should be, if they let the money-changer robber-barons belly up and put the Billions of Dollars direct to the people, if they told the banks they would give them the money to bail them out but they also have to apply that money to the defaulted homes of homesteaded homeowners, if the public got the money in their hands, THEN you can have your turn around and post tragedy economic boon without going to war as the motivating tragedy.

But we’re dealing with politicians and a would-be despot, a wanna-be king that are power hungry power monger control freaks.  I don’t really expect them to do the right thing to fix the nation and the economy, to save American Jobs and Homes.  Nope, I don’ expect that will occur, I expect war.

 

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Stimulus & Economy Snapshot 04/06/09

Morgtage Bailout Scams

The FTC recently sent warning notices to 71 companies running suspicious advertisements. The agency also filed three new complaints against Northridge, Calif.-based Federal Loan ModificationLaw Center LLP, Newport Beach, Calif.-based Bailout.hud-gov.us, and Clearwater, Fla.-based Home Assure LLC, and the operators of those companies.

These companies are misleading the public from the start beginningwiththe name of their outfit.  There are hundreds of officialsounding companies that are using words from current news and official government programs to mislead the public.  Just like the old “free grant money” scams that offer to sell you information about real government grants.  They now are selling you “Stimulus Grants” and it is the same old false hype.  Information about legitimate grants is available for free so you are paying for a cover letter and semi-sorted search results plus a lot of useless fluff. 

The FederalTrade Commission filed cases against two other companies last month: Hope Now Modifications LLC and New Hope Modifications LLC.

According to various government officials, scams like these are taking advantage of desperate borrowers and those in danger of default or have already defaulted.  They do so by charging them upfront fees of $1,000 to $3,000 for help with loan modifications that rarely, if ever, pay off. 

While it is possible to renegotiate, modify and otherwise work out a deal to save your home, these scam outfits aren’t going to be doing it.  Bankruptcy is an option to buy time and reorganize to save a homesteaded home.  Depending on where you are it can range $1,500 and up for an attorney to do it plus costs.  That is a marketing ploy for a number of attorney’s right now.  They promote saving your home getting your information for court records when foreclosures are filed.  They present themselves as mortgage or loan specialists able to renegotiate, modify or otherwise save your home.  When you go and meet withthem it’s free initialconsultation.  They talk with you for 15 minutes and give you a prepared “info pack” from a nearby stack.  All about bankruptcy and they tell you  that is going to be your best option.   They don’t save your home through any programs or negotiation at all.  They handle your bankruptcy case for you.  While that is an option, it is not necessarily the best or only option you might have.

In related news, the FBI is investigating over 2,000 mortgage fraud cases said Attorney General Eric Holder.  This is  says the , a 400 percent increase from five years ago.  “If you discriminate against borrowers or prey on vulnerable homeowners with fraudulent mortgage schemes, we will find you, and we will punish you,” Holder said.

 

King Obama

Last week he told the major automakers he didn’t like their recovery plans.  He told GM and Chrysler specifically they might need to just file bankruptcy.  He wasn’t going to give them any bailout money unless they changed what they were doing and gave up more control of the company to the Fed.  The Fed also demanded GM’s Top man to step down and get out.

Who the HELL does he think he is?  He’s supposed to be president and head of our government.  He is acting like he IS the government and it’s HIS money he’s dishing out!  He has no power or authority to be making these statements and demands he is making.  That is up to lawmakers and the houses of government officials to do.  He is stepping nicely into the role of King and throwing off the shackles of Constitutional Government instead making his own rules as we go along.  To get the stimulus bills and programs passed there were a lot of secret negotiations and closed door meetings.  Most of the plans and programsthat have been rolled out have no voting on them by elected officials and no voter approval was given.  Most are privately drafted policies, rules, guidelines and programs that were given to the president for approval even though his approval wasn’t required.

He has no background in big business and needs to stay out of the corporate boardroom.  He really should stick to politics and helping the American People with plans and programs.  Forcing his will upon corporate America and wresting control of private industry away from the private sector by tying it up with money strings is going to have long term detrimental consequences for the entire world.

The administration will protect consumer warranties from General Motors and Chrysler vehicles and make sure parts are available to quell fears in consumers which could prevent them from purchasing a new auto.  So Obama is now going to be in the car repair biz?  They have NO way to back this up other than to either fund or take over a bankrupt company to make good on this promise.  Obama is also telling Chrysler to sell out to a foreign entity and then he will give them up to $6 Billion in aid.  If they don’t sell out, he is not putting any more money into the company.  WTF is that all about?  Sell off America to foreigners?

Barack Obama refused any more Fed bailouts for GM and Chrysler,  saying the companies needed to get more deals from the unions and the automakers creditors among others before any more money will be approved.  He did say that in bankruptcy if that is the way it goes they would look to speed up and expedite the process.  Wow, how nice to just take over the nation and LITERALLY take it over telling everyone how to run their business, their life, and in the case of government agencies and politicians,  how to think and what to approve or disprove.

He is essentially taking command of GM and telling Chrysler to merge with a foreign competitor or cease to exist.  As I posted in the past couple weeks, Obama is using economic conditions that are evidently dire enough to warrant a new level of government involvement in the management of corporate America on a level that has never before been even dreamed of let alone enacted upon.

 

King Obama’s New Declaration

King Obama is again abandoning the United States in favor of Muslims with his new declaration, the U.S. “is not and never will be at war with Islam,” amid other racially and ethnically charged comments during his meetings and speeches.

What planet has this this guy been on the past 20 years?  Iran, Iraq, Afghanistan come to mind in regards to being Islamic nations.  While Obama conceded there are still tensions over the Iraq war but said Muslims worldwide have little in common with terrorists such as al-Qaidaand have much to gain in opposing them.   Why is he bothering “politicking” these foreigners?  Half of Islam are fundamentalists and half of them (if not all) would like to destroy the USA if they could.  He also spoke of his own Muslim background once again stepping over the boundaries of a US president AND abandoning entirely the principles our nation was founded upon.

“We seek broader engagement based upon mutual interest and mutual respect,” Obama said in a speech to Turkey’s Parliament.  DUDE!  There is no WE!  It is YOU that is interested in joining up with Islam.  The rest of America wants the United States to remain the strong, independent world power it has always been.  ALL Americans that are true Americans want a constitutional government Of the people, By the people and FOR the people.

“Our partnership with the Muslim world is critical, not just in rolling back the violent ideologies that people of all faiths reject but also to strengthen opportunity for all its people,” he said.  He portrayed terrorist organizations like al-Qaida as extremists and not at all representative of majority of Muslims.  He must be blinded by his recent self crowning as king because that is simply a fallacy on his part.  It is also something that is seen right through by any muslim anywhere.  While the militants are a minority, the beliefs and thought processes are the same for the majority.

Why are we kissing up to this mongrel country?   Remember, Turkey barred U.S. forces from going through its country to attack Iraq and was vehemently opposed to our “invasion” of their air space.  They should be ignored and trod upon as they do with their own and how they ignore the needs and desires of the rest of the world so too should theirs be ignored.

 Obama further pumped their egos stating, “Turkey’s greatness lies in your ability to be at the center of things. This is not where East and West divide — this is where they come together”.

He further declared,   “I know that strain is shared in many places where the Muslim faith is practiced. So let me say this as clearly as I can: The United States is not and will never be at war with Islam.”  No, just a host of Islamic countries and organizations.

 

USA not the USI

Obama pronounced his own heritage: “The United States has been enriched by Muslim Americans.  Many other Americans have Muslims in their family, or have lived in a Muslim-majority country.  I know, because I am one of them.”  Obama’s Kenyan father and grandfather were Muslims, and he spent time as a child in Indonesia, the country with the world’s largest Muslim population.

There was a strong hearty ovation near the end of his speech when Obama said the U.S. supports the Turkish government’s battle against the Kurdish rebel groupPKK.  Boththe USA and Turkey consider them a terrorist group.  Of course he got a rousing ovation when he said America was not at war with Islam.

Turkey is a member of both the G-20 and NATOand is trying to get into the EU with the help of the U.S.  Instead of trying to get in bed with the muslims in this Isalmic country he should USE this fact and leverage it to OUR advantage as a bargaining chip.  They NEED us, we don’t need them.  OUR advantage as in the UNITED STATES OF AMERICA, not the kingdom of Obama Hussein and the USI (United States of Islam).

Obama stongly supports the Turkish bid for membership in the EU.  He reiterated it this past Sunday at the meeting in Prague by the G-20.  In so doing he has raised the ire  of many long time USA allies, epecially France and Germany, which rightly point out that America has no say in the matter.  Back-pedalling quickly, Obama conceded the point saying he waonly speaking “as a friend” of both Europe and Turkey.

“Turkey is bound to Europe by more than bridges over the Bosporus.  Centuries of shared history, culture and commerce bring you together,” he said. “And Turkish membership would broaden and strengthen Europe’s foundation once more.”  Maybe he forgot the pivotal roles Turkey had in the crusades, the dark ages, World War I, World War II the support of terrorist groups and countries so long as it didn’t consider them terrorists or enemies against them.  Though Obama held to his 2008 statements that Ottoman Turks carried out widespread killings of Armenians early in the 20th century, he stopped short of repeating the word “genocide” that he has used in the past.  While not a reversal it is clearly another back-pedalling maneuverto foster a union with the muslim country.  “Well, my views are on the record and I have not changed views,” was all Obama said.

It’s officially estimated that up to 1.5 million Armenians were killed by Ottoman Turks in the years prior to and into World War I which is an event viewed by many scholars as the first genocide of the 20th century.  Turkey don’t deny the deaths but denies that the deaths constituted genocide.  Just like some claim the holocaust didn’t occur and the death count was inflated.  Turkey claims the toll has been inflated and the casualties were only victims of civil war and unrest.

Mingling during a dinner Monday night, Obama met privately with the foreign ministers of Turkey, Armenia and Switzerland, according to a senior White House official.   Obama commended their efforts to normalize Turkish-Armenian relations and further urged them to complete the talks “withdispatch,” the official said.  Publicly, in his speech to the Turkish Parliament — what used to bey the Turkish Grand National Assembly — Obama said, “History, unresolved, can be a heavy weight.  Each country must work through its past.  And reckoning with the past can help us seize a better future.”

“I say this as the president of a country that not too long ago made it hard for someone who looks like me to vote. But it is precisely that capacity to change that enriches our countries,” he said which clearly alluded to his heredity and the black race. 

In his news conference with Gul, Obama commented on the rift in U.S. and Turkish relations concerning Iraq.  “I do not think they ever deteriorated so far that we ceased to be friends and allies. What I hope to do is build on what is already a strong foundation,” he said.

 

Depose and Dethrone the King

Basiclly he insuated  “I’m a black muslim and in my country’s past people like me had no rights.  Now, I’m king of the place and trying to solidify my position by aligning with muslim nations so in the future my power cannot be usurped.  So I am puffing you up with this semi-transparent fluff and politics hoping you buy it.  I have America over the barrel financially.  You want me to back you and I will flex my powers, but you need to back me as my friend because I am backing you now.

Get on the phones to your elected representatives, tell them to step forward and take control of their own office and follow the constitution in coming up with rules, policies and regulations.  Tell them  to take control back from Obama.  Depose him as king and put him in his place as the President of the United States, it is a title, entity and office which he holds and was elected to fill and take care of according to the people for the people in accordance with the U.S. Constitution and all our laws in existence today.  If he won’t step down as King which he is trying to become, then impeach the man for trying to take over the country as a despot.

 

 

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Stimulus & Economy Snapshot 02/19/09

Daily Economic News & Insight

Obama Mortgage Bailout Hazy

There have been various reports about the new mortgage bailout initiative.  Some say $75 billion and some say $275 billion.  Some say new money going into it but others report it’s money already set aside for it.  So far the only thing that is clear is that right now, there is still NOTHING available that can help anyone out of foreclosure. 

The way it looks right now, there is $75 Billion to be set earmarked to help select homeowners.  About 4-5 million homeowners that fit a specific niche AND qualify will receive any benefit from this part of the plan IF it comes to fruition.  The bulk of the funding for this portion of the”mortgage bailout” is to come out of last years approved bank bailout.  $50 Billion of that money “ALREADY SET ASIDE” is supposed to be used for this part of the plan.  The other $25 Billion is additional money and there wasn’t any indication as of this writing as to where it will come from.  It may be part of the Treasury plan to print more money and make it available to the banks to lend.  The homeowners that will benefit from this are those who have a job, are behind in their monthly payment, they cannot refinance because the drop in the housing market has lowered the value of the home below what they owe.  They also must be behind due to the ARM payments climbing and show that they can meet a lower payment consistently IF they are refinanced with this measure.  This is a multi-way sharing of the problem it seems because the lender must accept a lower principal amount that is up to 80% (some say 90%) of TODAY’S appraised value, they cannot charge points or additional fees, the fed will guarantee the new loan AND will make a one time payment up to $6,000 cap to cover the lost value of the home or note.  If they mortgage company has to take a $20,000 hit to the loan to get a new guaranteed loan in there at a lower interest rate AND the rate is fixed, then the fed is going to pay up to the cap amount.

The other part of the “mortgage bailout” plan is mentioned at up to $200 billion but is even more vague at this stage exactly what, who and how.  So far it looks that it is more geared to Fannie and Freddie backed mortgages only.  Someone has to be in one to get a new one that they can qualify for if the rate, LTV, and personal income meet their criteria which details are unknown at this time. 

One thing is abundantly clear though, BOTH parts of the plan are stringent that they will ONLY be for owner occupied homes or homesteaded homes.  NONE of these funds can be used for any investment properties or alternate residences or investors, it is all strictly for mortgage problems.

This won’t help the bulk of the people in or near foreclosure.  There are WAY too many strings tied to this money for many to qualify.  In the first place there are a number of people that have lost their jobs and some for medical reasons not just the economy.  They have no income or are at a reduced income in a part time job or job that is at a lower pay class than their skill levels and experience had earned them prior.  These people are going to lose their homes unless something else is done that is far more costly and more far reaching than what they are talking about so far.

There is yet to come the “toxic loan cleanup” plan and perhaps homeowners that fall into this last category can be fit into this plan as some form of “personal emergency short term bailout”.  Ideally the Bankruptcy Law should be changed and homesteaded properties should be allowed to be stripped of the mortgage like other debt.  At least when it comes to these predatory lenders and sub prime notes.  These lenders and cretins have made exorbitant amounts of cash already taking advantage of people that could least afford their products but had no place to go and were forced to accept the “rape me interest” rates and terms.  Let these who have bilked so many suffer the fallout and lose some money now.   They will make it back with new loans to be sure.

Stocks Plummet Oil Skyrockets

The Dow hit it’s lowest point today since the last big crash back in 2002 when the economy was rocked on many levels post 9/11.   It closed out the day dropping over 80 points to 7,465.95 without any key indicator or event occuring to cause the decline.  Experts consider it a sign of investor concern over the economy in general and too many vagaries in the bailout plans being hammered out.

At the same time, oil prices jumped about $2 closing up to finish over $39 a barrel.  There was no new comments from OPEC today about trying to control production or the price that led to this surge.  The price was driven by traders on the news that the current supply is less than originally estimated.  Allegedly a spike in demand caused supplies to dwindle.  So far all it is driven by is the greed of futures traders and speculators right now.  Everyone sees a supply drop and the comments of OPEC not happy with the current price of oil and their talk of cutting production to dry up the supply, create more demand and raise the market price.  So investors are looking to get in on contracts now hoping to make a killing.  The cut in production, if it occurs, coupled with a struggling economy trying to rebound and using more as GNP eaks out small gains is going to send oil prices back up faster than everyone even OPEC would prefer.  So go ahead, grab some oil futures now for 3rd quarter and good luck.

Banks Pillaging Unemployment Benefits

Obama’s stimulus package increased unemployment benefits in both payment amounts and length of time to draw that pay.  Good news.  Except for many, those benefits are being cut by bank fees some of which can border on usury, theft and in some cases may be illegal not just hovering in a gray area.

At stake are millions of dollars in fees to a bank that is awarded a lucrative state contract to administer unemployment benefit payouts.  States are saving as much as a couple million dollars by contracting with a bank.  Instead of the state printing, processing and mailing out paper checks every month, they wire one lump payment to the bank.  The bank distributes debit cards to the unemployed and the state pays ZERO fees to the bank to handle and service the program.  The unemployed use the cards to gain access to their unemployment benefits.  BUT!  There are strings attached in the form of fees.  Oh yes, fees and then fees on top of fees.

Use the card more than 4 times and pay a fee in one case and then a fee each time it’s used.  In another case use the card at machine other than the bank and pay a fee.  If you use it twice the same day, there is a fee for that too in some contracts.  Worse, if you don’t have any benefits left in our account, but you use he card to make a purchase, you are charged an over draft fee to pay the charge which makes your overdrawn balance go deeper in the red, then there is the overdrawn balance fee for having your account in the red.  So if you were at zero or close, and you overdraw your account even by pennies, you get slapped an overdraft fee which puts your account further in the red due to the fee and now you have a fee for having the fee.  WHAT!?!??!  Some state politicians are looking into it now but expect there are going to be just a few changes and not much to help those having to pay fees to get their unemployment money.  Used to be you get a check in the mail.  It’s yours, you go cash it and spend it as you need to in order to survive.  That’s no longer the case.  From now on you have to pay a fee to get your money.  How stupid is that?

 

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Stimulus & Economy Snapshot 02/18/09

Daily Economic News & Insight

Obama Signed The  Stimulus Bill & Looks Ahead

The stimulus bill was signed and as expected, nothing happened.  In fact, the US markets are down, housing is still off, global markets are down, more job cuts have been announced and there is no good news coming from any quadrant.  Any good to come from this bill is going to show up later if at all. Looking ahead Obama announced he was looking at a housing bill to help prevent foreclosures.  A member of the Obama administration said the plan commits up to $275 billion for housing  Targeted in this is supposed to be help for up to 9 million American Families.  But if you listen to everything being said, that isn’t entirely true or new because that figure includes $50 billion of the funds already committed under last years financial industry/bank bailout. 

New Foreclosure Prevention Plan For “Mortgage Bailout”

Obama stated the goal of this new measure was  “rescuing families who have played by the rules and acted responsibly,” refinancing existing traditional mortgages for up 5 million homeowners who are upside down in their notes and either are owing more than the value of their home or are close to it due to the market collapse. 

But if there is a cap of $6,000 equity disparity in there, and they are only going to be writing up to 80% LTV per other programs already announced and in some rare cases may go to 90%, that still leaves a lot of lost equity on the table and the bill will be asking lenders to take the loss on that in the new note.  Basically this amounts to a short sale.  The lender sells the note to the new mortgage at less than face value.  The bad note is off the books, cash is free to the original lender, the homeowner doesn’t lose their home, the new note is fixed rate, lower price re-amortizedout with lower monthly payments. 

It remains to be seen how this will work.  It has been a YEAR almost since a similar bill ALREADY PASSED!  Funds were made available and NO LENDERS STEPPED UP!  None have taken the loss on the notes and refinanced under that act.  Last check last month I checked with a mortgage broker because I needed to get in with one of those plans.  He told me the lenders have all the details but so far no one is making these new plans available.  Everyone is still taking the wait and see stance.  He told me pretty soon they will have to do something and then they will begin using these programs and earmarked funds.  They won’t have a choice.  Take the discount or take the loss and in either case it’s a loss.  Which is the least loss is their concern.

In addition to this, it is estimated there are up to 4 million more homeowners that can be helped by earmarking up to $75 billion of the fund.  These families are trapped in sub-prime loans and are behind or in foreclosure because of the loan itself and/or individual hardships. Obama stated they are, “stuck in sub-prime mortgages they can’t afford as a result of skyrocketing interest rates or personal misfortune”.  Well damn it all you politicians!  Isn’t THIS the root of our woes!?  I mean hasn’t this been what we were looking at last year in April when they passed the first legislation to help save homes?  Why did we spend $800 billion without even addressing the root problem?  Yes, the economy is to blame for these people not being able to afford their homes now. 

But we were trapped to begin with and had no means for “saving for a rainy day”.  Furthermore it was a domino effect itself leading to lower discretionary spending.  The Fed messing with interest rates altered business climate and home lending climate creating a situation to foster predatory lending.  As people quit spending because they simply couldn’t, businesses started to feel the pinch and they cut back, etc…  It has been a downward spiral and will remain so until we get in at the bottom of the problem pile and work to fix it and shore up the economy.

Goodyear Doubles Job Cuts

The largest tire mfr. in the USA announced today, Wednesday, that they will cut an additonal 5,000 jobs this year.  This is in response to fourth-quarter plunging sales and resulting losses.  Sales dove 21% in the final quarter last year.  This job loss follows the loss of 4,000 jobs at the company in the last half of last year alone.  

Considering retail auto sales numbers for the nation have sunk a lot more in January as previously announced, this can only mean worse times ahead for car maker support vendors like Goodyear and Delphi (job cuts I posted yesterday). 

The domino’s continue to fall and will spiral outward from this but it moves from Detroit to Akron, Ohio in this case.  The company is headquartered there.  Though it wasn’t clear what plant or plants would see the largest cuts.  The point is, the problem isn’t going to stay in isolated areas.  It is going to mushroom and expand as the spores of this festering fungus recession float onward and outward. 

Goodyear lost $330 million in 4th qtr 2008 compared to a PROFIT in 4th qtr. 2007 of $52 million.  The bottom isn’t in sight yet and I expect more cuts to be announced within the next 90 days once current market conditions make their way from the retail sector back up the supply chain.  We have to consider, it is not just USA sales that are off, this is a global company and global economies are all languishing simultaneously at the moment.

Fed Announces Triple Whammy

Two new government reports show the domino effect mushrooming and  growing highlighting the damage being done and it’s wreaking havoc in three major sectors;  housing, credit and financial.  In fact, it’s the worst they have been since the 1930s. 

The Federal Reserve reports today a series of negative conditions.  National production is down in Factories, Mining AND Utilities.  Almost 2% for January alone.  That is much worse than the 1.5% expected decline the experts were anticipating.   Furthermore it marks the THIRD STRAIGHT DECLINING MONTH IN A ROW and final reports in reveal December was really worse than first reported as it plunged over 2% in that one month for a decline of 2.4 percent.

The second report from the Commerce Department said Housing was off substantially.  The Construction of new homes and apartments plummeted a whopping 16.8 percent in January compared to just the month before.  This gives us an adjusted annual rate of 466,000 units which is a record low.  It is far below analysts expectations of 530,000 housing units.  Builders are forced to cut new home construction because of the market.  Again the domino effect exploding outward.  This is the result of steadily growing numbers of home foreclosures flood the market with vacant properties  up for sale and discounted below reduced market values and IN a market already glutted beyond records.  There go more jobs for construction and related sales of materials, goods and durables and resulting jobs at those supply side chains as well.

To make matters worse it’s reported that applications for building permits also sank to a record low pace of 521,000 units in January.  Permits, taken out prior to new home construction starts, are an indicator for future activity.  Since permits also dropped almost 5% in January from just the month before, you can expect the next housing industry announcement to be negative as well. 

With this added economic damage from the housing sector crash mounting up higher than ever, the White House has to do something hence the $75 billion to help prevent more foreclosures as outlined above.  Obama madehis announcements today in Phoenix, AZ.  One of the hot spots in the country for economic and building booms in recent years but now in the top 20 for hardest hit with collapses in the market.

America Cuts Back

I have been saying for months we were in deep recession and start of depression.  I have compared events now to events back in the ’30’s.  Well here is some good news, the recession is over!  Bad news is, the depression has begun! Today for the first time I heard a business news reporter say mention we might be in a depression. 

He stated we are in the worst recession if not depression in an interview with Howard Davidowitz of Davidowitz & Associates, a consulting and investment banking services firm to the retail industry.

Americans, by necessity, are being forced to cut back.  They are saving again.  For almost a decade it has been spend, spend and spend some more.  Yes, many invested, and many lost. 

The biggest investment for most Americans is their home.  As a nation we have lost a lot of equity in our homes with the housing market crash.  As individuals, we have lost not only equity value but our homes as well.  Credit card debt climbed as Americans continued to spend while the mushroom was growing.  When it exploded it sent spores everywhere and new mushrooms grew and repeated the process until we end up with this major malfunction in the nation.

We are now in a depression fraught with all manner of danger. Up until now we would just work more, take on a second job, became two income families in order to make ends meet.  Besides becoming dual wage earners one or both also took on part time jobs to help supplement incomes when really pinched.  But that is no longer an option. 

There are no extra jobs out there and many dual income families have shunk to one income and in a lot of cases NO income as the jobless rate continues to grow every few days with new announcements of job cuts an plant closings. First things to go of course were luxuries.  But now it is down to bare necessities.  FOOD is about as base as you can get.

People can wear clothes from last year and wear them for years until they wear out.  People can keep driving an old car and using their old tools and watch the same TV.  They MUST have fresh food every week.  It used to be Food, Housing, Utilities, Auto, Insurance, Clothing, Entertainment and a few other things were always in everyone’s budgets.  Savings was last on the list.  They could always just go make more to earn more.  They can no longer earn more and are earning a lot less and therefore have had to look at things differently all of a sudden.

Going back to the Great Depression, it was a period of make do.  Scrimp and save just to put food on the table.  Not knowing where the next meal would come from.  Not knowing if the knock at the door was the process server or repo man. (back when they had the decency to speak to you first)   So much uncertainty and people looked for every opportunity to pick up any spare income and were extremely frugal.  Stuffing cash and loose change in the “Ball Jar” wasn’t just a scene in some movie, it was real daily life. 

Yeah, the depression was rough on America.  Massive market failures, factory closings, lay offs, job cutbacks and job loss, rapid erosions in sales across all sectors, loan failures, home loss, DAMN!  Sounds like TODAY! 

We are faced with all of the same issues right now.  We haven’t hit bottom yet and it will get worse before it gets better.  It WILL get better but not this year.  This year is the time for the final impact yet to come and next year will be the time for the dust to settle.  For restructure and growth it will come in the future.  For now, we have to nestle ourselves and prepare for any misfortune from any possible direction.

“The average American used to be able to borrow to buy a home, send their kids to a good school, buy a car,” Davidowitz said in that interview.  “A lot of that is gone.” I can only concur as I have been saying the same thing for months. 

Now, Americans have nothing to spend and are recycling but not in the sense of putting aluminum, paper and plastic in plastic bins.  No, they are returning to a time of using the jam jar as a cup, the butter tub as a bowl.  Putting water in the ketchup bottle when it’s low and spending more time at home.  They are repairing their clothes and hitting consignment shops.  They are fixing their cars or furniture or clothes and things rather than buying new.  Any extra money, if there is such a thing these days, goes in the bank, but if closures continue to escalate, Americans may revert to the “ball jar”.

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