New Mexico Experiences Exponential Growth

Usually congressional districts are added to a state after a census. The next census is not until 2010; however, it seems that as a result of some explosive, yet undocumented growth, the number of congressional districts in New Mexico has grown from three to forty [hat tip: New Mexico Watchdog].

Of course, as is evident by the chart below taken from government run recovery.gov, many of these new congressional districts are still waiting for their stimulus money.





But, it is expected that all eyes will be on New Mexico's 22nd Congressional District (once it can be located), which was able to turn less than $62,000 in Recovery Act funds into an amazing 25 new jobs. The cost of living in this particular district must be incredibly low as that amounts to a $2,480 salary per new job created.

Comparing the number of jobs created in New Mexico's 22nd Congressional District with the 15.8 jobs created in the state's 35th Congressional District for a whopping $8.9 million is the cause of more than one raised eyebrow. Rumors of political favoritism abound, but as of the writing of this post the congressional representatives from these districts could not be found for comment.

Now, for those of you who think this is no more than a programming glitch, please keep in mind this is a state of the art website built with no expense spared:

A Maryland-based IT firm that specializes in defense contracts was awarded the federal contract to build Recovery.gov, the government site meant to make stimulus spending transparent. The bill to taxpayers for this Web site will be $9.5 million in the next six months.

To put that in perspective, consider USASpending.gov, the Web site created by the Coburn-Obama Act of 2006 that tracks all federal contracts and grants. The government purchased the software for that site for $600,000 from nonprofit watchdog OMB Watch, which had developed the software for itself outside the federal procurement system.

Or, consider the many spending transparency Web sites that state governments have recently created. The most expensive of these is that of Texas, which cost $300,000 to develop. Most states spend less than $100,000 on transparency sites.

Maybe I'm not being fair. Maybe it was just a clerical error. Well, if they can't keep track of the money flowing into New Mexico, just how well do you think they tracked the trillion plus flowing into the rest of the nation.

Everybody starting to understand why unemployment numbers keep rising despite government "stimulus" spending.

The Make-Believe Results of the Stimulus

Republicans won in New Jersey and Virginia yesterday and not surprisingly the dismal state of the economy helped them earn their victories:

A plurality of voters in both states cited the economy as their top concern, according to exit polls. Majorities in both states said Obama's job performance was not a factor in their vote.

So, what does this mean for New Mexico and the 2010 elections? Well, it looks promising that those serving in leadership positions in the current Administration will be shown the door. Keep in mind, that New Mexico has always lagged behind other states when it comes to experiencing economic downturns, and this truth has continued through the current crisis. But, inevitably the piper has to get paid.

Spaceport funding for billionaires and trains serving the geographically privileged continue to drain state coffers, while talk of raising "painful" taxes on the masses, turning prisoners loose on a scared public and breaking contracts with municipalities is the Administration's agenda of the day. This set of priorities just won't sit well with voters come Election Day 2010.

Now, for those of you who think the economy is getting better, and all will be well by that fateful November day, I say think again. Earlier this week, we looked at the economic deception of the Cash for Clunkers program. Now, let's look at the reality of job creating/saving stimulus scam:

President Barack Obama's economic recovery program saved 935 jobs at the Southwest Georgia Community Action Council, an impressive success story for the stimulus plan. Trouble is, only 508 people work there.

Of course, that's only the tip of the proverbial iceberg the same article from which the excerpt above was taken also notes:

The latest stimulus report, released Friday, significantly overstates the number of jobs spared with money from programs serving families and children, mostly the Head Start preschool program. The report shows hundreds of the programs used nearly $323 million to provide pay raises and other benefits to their existing employees.

The raises themselves were appropriate — the stimulus law set aside money for Head Start salary increases — but converting that number into jobs proved difficult. The Obama administration told Head Start officials to consider a fraction of each employee as a job saved.

Nice. Turning pay raises for some government employees into make-believe new saved/created jobs. Now, you know why the phrase "stimulus scam" has entered the popular vernacular. Okay, so if jobs created/saved numbers are false, then what does that mean for our economy. It means we're in trouble. It means that the unthinkable is starting to be thought about:

Governments of rich countries are borrowing so much that it's conceivable that one day the twin assumptions underlying their burgeoning debt (that lenders will continue to lend and that governments will continue to pay) might collapse. What happens then?

Of course, that question is talking about governments on a national scale. The problem we're facing is an economic collapse in state and municipal governments. You'll recall that in the state of New Mexico government is the largest employer. Now factor in all of those in our relatively poor state that are living on the government dole and about to lose it. It's not a pretty picture.

Government is spiraling out of control, and the lack of real leadership has never been more obvious. If those connected to the hip with Governor Richardson think they are going to fare well come November 2010, well there is a good chance they also believe that the stimulus package created/saved jobs, and the that tooth fairy leaves money under pillows.

Cash for Clunkers Cost Taxpayers $24K per Vehicle

As the healthcare debate continues and a public option keeps being pushed, it is a good idea to do a reality check and see just how inefficient government programs truly are. The mostly highly publicized "successful" government program of late is the Cash For Clunkers program. This was a $3 Billion taxpayer funded bailout of automotive manufacturers. It was a small part of the overall redistribution of dollars from taxpayers to automotive manufacturers and their Wall Street investors.

The program was so wildly "successful" that it looks like Ford is back on the road to recovery:

Ford Motor Co. earned $1 billion in the third quarter, fueled by U.S. market share gains, cost cuts and the government's Cash for Clunkers rebates.

The Dearborn, Mich.-based automaker on Monday reported net income of $997 million, or 29 cents per share. Ford says it now expects to be "solidly profitable" in 2011. Previously the automaker said it would be break-even or better.

That's great news, right? Well, I guess that depends on who you are. If you work for Ford, or are an investor in Ford, definitely great news. If you were one of those folks who traded in your clunker and walked away with a new Ford, also, great news. If you are a present or future taxpayer who actually had to underwrite this latest government scam, well the news is not so great. You may have thought you were helping your fellow citizen get into that new car ( I'm sure a high priority for most of you) with a $4,000 subsidy, but the truth is actually a much bigger subsidy:

Edmunds.com, the premier resource for online automotive information, has determined that Cash for Clunkers cost taxpayers $24,000 per vehicle sold.

Nearly 690,000 vehicles were sold during the Cash for Clunkers program, officially known as CARS, but Edmunds.com analysts calculated that only 125,000 of the sales were incremental. The rest of the sales would have happened anyway, regardless of the existence of the program.

Ironically, the average transaction price for a new vehicle in August 2009 was only $26,915 minus an average cash rebate of $1,667.

Nice, every taxpayer just paid to give away a free car. Only a federal government program could take money from the masses and redistribute it to a few, who would have bought a new car at some point in the future with their own money, in order to help some companies postpone their demise or exceed expected earnings. This is just too absurd.

Still having a hard time getting a grasp on this? Well, consider what the much heralded "successful" Cash for Clunkers program may as well have done.

For that price, the federal government could have purchased the 125,000 cars outright at manufacturer suggested retail prices, such as a Ford Fusion, Focus or even a Mustang, and then handed each of the recipients an additional bonus check averaging the Cash-for-Clunkers subsidy of $4,000. Or they could have bought every one of those 125,000 people a Smart car and then given them a check for $6,000.

Now, we're going to put these same government folks in charge of our healthcare programs in order to cut costs. Yeah, that's gonna work well.

Seems More Than a Little Disingenuous

I keep hearing a Ford ad on the radio being run by a local dealer, which proudly lays claim to the "fact" that Ford didn't take any government money (i.e. taxpayer money). While it is true that Ford didn't seek TARP bailout funds, it seems more than a little disingenuous to run ads that claim Ford didn't take government money:

The National Highway Traffic Safety Administration has processed 80,500 transactions so far, and the early winner of Cash For Clunkers appears to be the Ford Focus. The Detroit News is reporting that the Focus is the number one vehicle purchased under the government program, showing us why Ford's C-Segment vehicle gained 43.6% in July. Ford also saw an amazing 97% increase in Escape sales in July, a tally that was likely improved with the help of Cash For Clunkers.

Sorry Ford, this doesn't pass the smell test. Last I checked, the $3 Billion spent on that Cash for Clunkers program does count as government money (from taxpayer pockets). Of course, it's not the only government money Ford is taking.

Now, I don't blame Ford for taking this money. If the government is going to be spending like no tomorrow, your foolish if you let your competitors get a competitive advantage. But, please don't run self-congratulatory ads pretending you're not taking taxpayer money. It's kind of insulting.

An Upside Down World

We're living in a make-believe business world. Business news reports that AIG stock was up 264% in the month of August on reports of profits and a new CEO at the helm. But, here's the thing, none of it is real:

Since the government holds its 79.9% interest in AIG in preferred shares, taxpayers don't stand to gain from a steep rise in the company's common stock price.

Instead, the preferred shares pay a dividend. But the dividends on the TARP part of the bailout -- $41.6 billion, or about half of its overall loan -- are "noncumulative." That means that the company can skip dividend payments without the obligation to make up the difference later.

And that's just what AIG did on Aug. 3, failing to declare its dividend payment to Treasury. Should AIG miss three more dividends, the government will have the right to nominate two more directors to the insurer's board.

Despite Benmosche and investors' enthusiasm, AIG is still a very troubled company with a sizeable debt to repay to the government.

Think about this for a moment. You've got a company that doesn't have to pay dividends to 80% of it's owners (i.e. U.S. taxpayers), yet it gets to pretend it profitable. This is all surreal. What I don't understand is why this is being reported in the business news. A company that is 80% owned by the federal government is for all intents and purposes a government entity, not a business entity.

You disagree? Well, think about who is hiring the new CEO and approving his salary:

In the Securities and Exchange Commission filing, AIG also said that Kenneth Feinberg, the Obama administration's pay czar, "expressed approval in principle" for Benmosche's compensation package. Feinberg still must formally approve the new CEO's compensation.

By the way, the compensation package for running this bailout created government agency is really pretty impressive:

AIG, the bailed out insurer whose pay practices sparked outrage earlier this year, has agreed to a $10.5 million pay package for its new CEO -- a stark contrast to his predecessor's $1 pay but drawing zero outcry from politicians or regulators.

The approval for a package, with a cash component that dwarfs what many competing insurers' CEOs have received, may be a sign that the Obama administration and lawmakers have begrudgingly accepted that even firms that took federal funds will have to pay top dollar to attract, and keep, executives.

Who are we trying to kid here? This is no longer a firm that took federal funds. This is a federal firm. The CEO of this firm does not create shareholder value. The CEO of a company like this should be on a government pay schedule.

The Ugly Truth About ARC Loans

The federal government under the Obama Administration and the Bush Administration before it has bent over backwards to bailout America's largest mismanaged companies from banks to automotive makers to insurance companies to investment houses. And, when they're not bailing out big business, they're bailing out mismanaged states. The latter is why the vast majority of the Recovery Act dollars are being floated through states before... never mind, there is no before. The dollars are just flowing into state coffers, period.

Now, maybe you're thinking that small business is getting a piece of this stimulus spending. After all, you've heard the countless news stories about that great SBA program, the American Recovery Capital (ARC) Loan:

ARC loans can be used to make payments of principal and interest, in full or in part, on one or more existing, qualifying small business loans for up to six months. ARC loans provide an immediate infusion of capital to small businesses to assist with making payments of principal and interest on existing debt. These loans allow borrowers to redirect cash flow from making loan payments to investing in their businesses, to help sustain the business and retain jobs. For example, making loan payments on existing loans with proceeds from an ARC loan can allow a business to focus more funds on core operations, such as buying inventory or making payroll.

ARC loans are interest-free to the borrower, carry a 100 percent guaranty from the SBA to the lender, and require no fees paid to SBA. Loan proceeds are provided over a six-month period and repayment of the ARC loan principal is deferred for 12 months after the last disbursement of the proceeds. Repayment can extend up to five years.

Hey, I own a small business, actually three, and wow, what a great deal. After all, I'm part of the original MTV generation. "Money for Nothing" was practically a theme song of my high school years. So, forget my limited government, no bailout philosophy. Sign me up for the free money. After all, look how quickly the federal government has been able to put billions upon billions of dollars in the pockets of big business. How difficult can it be for me to get my hands on a small $35,000 loan? Well, it turns out very difficult.

Diego Iorio sounds like the kind of small business owner the government's new ARC loans are made for. His two-employee audio gear retailer, SIRS Electronics, had been profitable through last year, with 2008 revenue nearing $500,000, but his projections for this year are down 40% to 50%. Although he has not missed any payments yet, SIRS, based in McAllen, Tex., has $140,000 in debt split among credit cards and payments owed to vendors. "We are in a very delicate situation right now," the 41-year-old Iorio says.

He prepared 200 pages of paperwork, including financial statements and tax returns going back three years, and applied for an ARC loan through Wells Fargo (WFC) just after the program launched June 15. The loans, made by banks and fully guaranteed by the government, give small businesses up to $35,000 interest-free to pay off other debts for up to six months, with repayment deferred for a year after that. But Wells Fargo rejected Iorio's loan application because his personal credit score, at 649, was below the 680 the bank requires. To Iorio, it's a catch-22: His score had been above 700, but it suffered when he took on debt to support the business.

Let me bring this to a more personal level. I called a business banker in town I've known for years when this money finally became available. He told me his bank would only be considering making the loans to current bank customers. Okay, fair enough. So, I called one of the banks with which I have a business account. As luck would have it, it was none other than Wells Fargo.

Wells Fargo told me they couldn't give me information over the phone or email me about the program, and that I would have to stop into a branch. Okay, no problem I had a deposit to make anyway. So, off I went to my local branch. I made a deposit into my business account and when the nice lady behind the counter asked me if there was anything else. I said, "Yes, I'd like to apply for an ARC loan." She looked at me quizzically. So, I explained what an ARC loan was. She thought she might have heard of that. Unfortunately, she said she'd have to take down my name and number and have someone get back to me later that day about how to apply for the loan. So, off I went.

Well, two and half weeks went by and I still hadn't heard anything back. I decided to go back into the bank. I signed the book, took a seat and waited 30 minutes for a banker to become available to see me. She called my name, and we sat down at her desk. As luck would have it, it was the same nice lady that had taken my deposit during my previously mentioned visit. I told her why I was there, and her response was, "Oh right, I remember you."

She then took out a piece of paper and said, "You're going to have to call this number and talk to a business banker. We don't have a business banker at this branch, so no one here can actually give you information on ARC loans." I asked if I was going to have to go into that branch and repeat the process, and she said, "Oh no, he'll be able to tell you over the phone whatever you need."

Hmm, couldn't help but wondering if he could help me over the phone, why I ever had to go in to the branch in the first place. Well, I called the guy and got voicemail. No surprise. He did return my message that same day, and after I told him what I was looking for, he said, "I can send it to you, but you should know it's a 25-page application."

"No problem," I thought. Although, since I'm in the business of billing for my time. I was beginning to doubt this whole money for nothing concept. I'd already spent a couple of hours looking into this thing. Heck, I was thinking this might take less of my time if I could just be called to testify in front of Congress and then walk away with a much bigger check. I would even know not to take the company jet. Granted, I don't own or have access to one, but I still would know not to take it.

So, the guy emails me the ARC application. Hmm, they could answer my question over the phone and email the application. Still wondering why I had to go into a branch. Sure enough, it was 25 pages long. But, I actually didn't have to spend too much time filling it out because I didn't get past the first page, which contained this fact listed under the section, Facts about the ARC Loan Program and Wells Fargo::

ARC loan funds are to be used for payments of principal and interest for up to six months on existing, qualifying small business loans, capital leases, business credit cards and vendor loans. Wells Fargo will only fund Wells Fargo business credit cards transactions of $5,000 or higher.

As luck would have it, I don't have business credit cards with Wells Fargo. But, this all got me to thinking. First, why couldn't Wells Fargo include these facts on their website? Next, exactly who is this loan fund supposed to benefit?

Apparently, it's not intended to benefit me the small business owner. In fact, it looks like another gift for large banks. Specifically, it looks like a way for a bank like Wells Fargo to convert their unsecured credit card debt of $5,000 or higher to a 100% guaranteed loan backed by the SBA at prime, plus two percent. Not a huge profit by credit card standards, which is probably why the bank is only interested in converting their own credit card debt.

Despite the lip service paid over and over again to small business driving the economic engine needed to bring us out of the deepening recession. Nothing could be further from the truth. When it comes to small business, the only interest the federal government has is how to increase taxes on those businesses.

No Bailout for Tech Failures

Time has an interesting look at the ten biggest tech failures of the last decade. You know, companies and products that failed when common sense still dictated that it was okay to allow a business to have a lifecycle.

Some of this biggest and most recognizable brands in the world made the top ten. Heck, Microsoft is on there twice:

1. Microsoft Vista
2. Gateway
3. HD DVD
4. Vonage
5. YouTube
6. Sirius XM
7. Microsoft Zune
8. Palm
9. Iridium
10. Segway

These companies aren't getting bailouts, nor should they. As anyone who has ever taken a business class can tell you companies have lifecycles. Only the foolish expect them to last forever, and to invest in a company on its way out is, well, beyond foolish. Yet, that is exactly what the federal government has been doing with our taxpayer money.

Consider February reports regarding the amount of taxpayer money that flowed into GM and Chrysler:

General Motors and Chrysler LLC asked the government Tuesday for $21.6 billion in additional loans, but the final cost of a bailout of the auto industry could be significantly higher.

The two struggling auto giants have already received a total of $17.4 billion in loans. If they get the new loans they want, the price tag of the bailout would climb to $39 billion.

What's more, $7.5 billion in loans have already been approved for the financing arms of GM and Chrysler. Congress also approved funding last year for $25 billion in loans to help automakers convert their plants to produce more fuel efficient cars.

And, what did that huge investment get us? A temporary reprieve of a few months. Ultimately, the inevitable still happens - GM bankrutcy and massive job cuts:

The next auto businesses on the chopping block will be 2,600 General Motors dealerships.

GM Chief Executive Fritz Henderson said Monday that the company would by the end of the week start notifying dealerships it wants to eliminate over the course of the next year. The company said last month that it planned to eventually eliminate 42% of its 6,250 dealer locations, which employ more than 300,000 workers among them.

On Thursday, Chrysler LLC's announced that it is dropping nearly 800 Chrysler, Dodge and Jeep dealers, or about a quarter of its network, as part of its bankruptcy restructuring.

If we don't start letting more businesses move through their natural lifecycle without attempting to bail them out, our county will go bankrupt.

Obama Town Hall in NM on Credit Cards

It looks like President Obama is coming back to New Mexico, and the topic of conversation:

Gov. Bill Richardson says President Barack Obama is planning to visit Albuquerque next week to hold a town hall meeting on credit card debt.

Here is the thing. There has been an awful lot of talk on this front. Yet, if you want to file a complaint against what appears to be abusive practices, the federal government makes you jump through unnecessary hoops.

You might remember that not long ago I put up a post regarding what I thought was a rather questionable practice by Bank of America:

So, the question is raised, "Why would Bank of America intentionally set a Sunday due date if making payment on this date is going to cause the consumer to be considered late?" When I spoke to the customer service representative, I was told that when I logged online to pay my bill, there was a disclaimer that it would not be processed on time. Of course, by that point in time there is absolutely no way to make a timely payment on the account - because Bank of America purposely set the due date to fall on a SUNDAY. In fact, he told me, even if I had paid the bill on Saturday, the day before it was due according to my statement, it still would not have been processed in time.

In that post I indicated that I didn't take all of this sitting down. Instead, I spent some time researching which was the appropriate federal agency with which to file a complaint, and submitted a very detailed online complaint with the Comptroller of Currency.

What did I get for my trouble? I got an email response that said:

We handle a large volume of Emails. Since you have been assigned a case number, we request that you communicate with us through phone (800-613-6743), fax (713-336-4301), or regular mail as we do not process complaints by Email.

This is absurd. I'm not asking them to act on my behalf as much as I'm asking them to look into a situation which is no doubt impacting millions of Americans. Since I doubt I'll receive an invitation to ask questions at the President's town hall in New Mexico, maybe one of the Democrats reading this can ask the question I raised in that previous post.

Fair is Fair

Just under a week ago, I went after White House Press Secretary Robert Gibbs for going on the attack against those in the entertainment news industry - keyword:entertainment - because I felt it was beneath the Office of the President, and just not a smart PR strategy.

Well, it looks like some of those same entertainment news guys who were on the attack are now making THE EXACT SAME MISTAKE as Press Secretary Gibbs. They're trying to defend themselves against a comedian. If you haven't seen this clip from the Daily Show, you have to watch it:

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Economic Crisis

Okay, I've got a couple of thoughts on why this is so funny, but before I go into it, you have to watch the commentators reaction to Jon Stewart's bit:



Doesn't anyone get public relations advice anymore. These guys just made total fools of themselves. I can't believe they're whining about the content of a political comedy show.

Ok, so why does Jon Stewart's bit make me crack up. Hmm, could it be because I was listening to several different news shows yesterday and heard this over and over and over again...

Wall Street snapped out of its stupor and posted its best performance of the year Tuesday, finding a badly needed glimmer of optimism in the most unlikely of places: Citigroup is actually managing to turn a profit. The 379-point gain for the Dow Jones industrials, a rally of almost 6 percent, was a welcome break from almost uninterrupted selling. But just as almost nobody expects the banks to snap back to health, almost nobody thinks the market has hit its bottom.

"One day isn't going to make a trend," said Kurt Karl, chief U.S. economist at Swiss Re.

Citigroup Chief Executive Vikram Pandit said in a letter to employees that the bank had operated at a profit for the first two months of this year and was on track, based on historical trends, to make $8.3 billion for the quarter.

Pandit said the bank has had its best performance since the third quarter of 2007, the last time it booked a quarterly profit.

Wow, it's a miracle. Citigroup says they made $8.3 billion for the quarter. What a turnaround. Amazing. Astounding. I am in absolute awe of the business acumen here...

Wait a second. Isn't there something I'm forgetting. Oh, that's right. I seem to remember something about a little infusion of cash:

The government will own up to 36 percent of Citigroup's common shares under the terms of the deal announced yesterday, which is designed to reassure investors that the troubled New York bank can survive the deepening recession.

The deal does not involve new funding from taxpayers. The Treasury Department already has invested $45 billion in Citigroup. The company may repay up to $25 billion with common shares rather than cash. The government will surrender billions of dollars in dividend payments on its original investment, but taxpayers will benefit directly if the company's share price recovers in the wake of the federal aid.

Huh. Who would of thunk it? Citigroup received $45 billion and the government surrenders "billions of dollars in dividend payments" and lo and behold Citigroup has billions of dollars in "profit." Wow, what a surprise! That's it everybody ought to jump back into the market.

Did I mention the strings that were attached to $45 billion of taxpayer money?

A key condition is that Citigroup must also convince investors to accept its common shares. The company must place $27.5 billion in shares with private investors in order to place the maximum of $25 billion with the government. If the company succeeds in full, its current shareholders will be left with roughly a 26 percent stake.

Mission accomplished! And, Wall Street emerges from its stupor. Please, if you bought into this yesterday, I've got some shares of Bear Stearns, Lehman Brothers, MCI Worldcom and Enron I'd like to offer you at an amazing price.

For those of you, who think I'm just trying to rain on the parade. Let's take a trip down memory lane. Don't worry, we don't have to go too far. Just need to look at reports from three years ago:

Citigroup Inc., the nation’s largest financial institution, on Monday reported its first-quarter profit rose 4 percent, beating Wall Street projections due to record investment banking returns.

Ah, but that's not the best part. For that, we have to read further into the story:

Citigroup joined other Wall Street institutions in reporting its strongest quarter of merger and acquisition activity since 2000, helping to offset the impact of rising interest rates on other businesses.

“We are seeing the benefits from our investment spending, which helped generate record revenues in our international businesses and record revenues globally in our corporate and investment banking business,” said Chief Executive Charles Prince in a statement. “Strength in these franchises more than offset weaker results in our U.S. consumer business.”

Corporate and investment banking profit increased 21 percent to $7.28 billion from $6.04 billion a year earlier. Citigroup has been one of Wall Street’s leaders in global debt and equity underwriting during the quarter, and has consistently led in announced global merger and acquisition deals.

Citigroup’s results come one month after Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. announced blockbuster earnings for the quarter that ended in February, buoyed by record revenue from equity sales and trading.

Imagine that. Those great results came one month after similar blockbuster earnings were announced by Lehman Brothers. Well, I guess we can expect to see history repeat itself, and in the next few weeks Lehman Brothers will be announcing blockbuster earnings.

Oh wait, that's right. Lehman Brothers went bankrupt. Don't worry though. We'll still get a chance to see history repeat itself.

Chicago Tea Party Kickoff

If you haven't watched Rick Santelli's Chicago Tea Party rant, you should. He expresses what 90% of Americans, myself included, are feeling right now:



I thought Maggie Thurber of Thurber's Thoughts hit the nail on the head with this excerpt from a recent post:

Here's an idea: I'll go out and purchase a Mercedes-Benz SLR McLaren for $457,250. It's listed as the 7th most expensive car in the world and I picked it because I liked how it looked. I'll make some of the payments on it and then, when I can no longer afford to do so, I'll turn to government and politicians and make the case that without my car I won't be able to work, so I need them to create a program that makes banks renegotiate with me to lower the amount I owe. After all, it's no longer new and it's just not worth what I originally agreed to pay for it.

Then, I'll insist on limits to how much my payments can be - no more than, say, 15% of my monthly gross income. If a house payment is okay at around 30% of monthly gross income, 15% seems like a fair number for a vehicle.

And, to top it all off, once I've got the debt reduced and the payments at a manageable level, I'll demand a prize for actually honoring the obligations I've committed to.

That's the equivalent of President Obama's Homeowner Affordability and Stability Plan applied to a car rather than a house. Doesn't quite seem right when you remove the emotion of 'home' from the equation, does it?

Whether a house or a car, they're both pieces of property and other options exist if either or both are taken from you because you don't pay. Perhaps, even, you might find an option you can actually afford in your current circumstances rather than live beyond your means at the expense of taxpayers.

I couldn't have siad it better than either Rick or Maggie, and apparently Rick's rant has struck a nerve with the White House. There first reaction was to... are you ready for this? Go on the the attack and insinuate that if Mr. Santelli would just take the time to read the plan he would feel differently.



So, go ahead and join Rick Santelli in downloading the Executive Summary, printing and reading it. Then, tell me if you don't feel like going on a rant yourself.

$500,000 Limit for Failing Executives

It seems like every news stations yesterday was talking about the $500,000 cap that was going to be forced on corporate executives of failing companies that opted to go on the dole:

The president aimed for a target — extravagant corporate behavior on the public dime — that fit the mood of the day. His $500,000 salary limit on executives from a limited number of companies was part of a broader assault on what he called a "reckless culture" that has helped wreck the economy.

"We don't disparage wealth. We don't begrudge anybody for achieving success. And we believe that success should be rewarded," Obama said. "But what gets people upset — and rightfully so — are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers."

First, let me state, that I'd be willing to take $250,000 a year to run a multi-billion company into the ground, and I would be more than happy to fly commercial, but I would expect to fly first class where the pillows and blankets are still free. If any Board of Directors is interested, I'm sure you can find my profile on Linked-in or Plaxo or Facebook.

Okay, with that said, I think it is pretty amusing that the "salary cap" for these CEO's who have so miserably is a $100,000 more than the leader of the free world and double that away from the person a heartbeat away from being leader of the free world:

The President of the United States earns $400,000 a year. The vice president's annual salary is $221,100.

Then again, to put this all in perspective, it's probably important to remember that a Vice President/CFO position at UNM pays more than being President of the United States:

Months before imposing a partial freeze on hiring and taking other cost-cutting measures, the University of New Mexico gave Vice President and Chief Financial Officer David Harris a $10,000 raise and an extra $50,000 in deferred compensation. The extra money pushed Harris' compensation package for the current fiscal year to $428,000 -- a 16.2 percent increase.

Now, does all of this mean that I'm a big believer in CEO caps for private companies? The answer here is a resounding, "No." But, a company taking billions of dollars in taxpayer funded bailout money is exactly private, is it?

Moving Towards Nationalization as Alarming Rate

When the federal government gave the first bailout to banks, it began to slide down a slippery slope. Now, we're tumbling at full-speed:

But if hundreds of billions of dollars of new investment is needed to shore up those banks, and perhaps their competitors, what do taxpayers get in return? And how do the risks escalate as government’s role expands from a few bailouts to control over a vast portion of the financial sector of the world’s largest economy?

The Obama administration is making only glancing references to those questions. In an interview Sunday on “This Week” on ABC, the House speaker, Nancy Pelosi, alluded to internal debate when she was asked whether nationalization, or partial nationalization, of the largest banks was a good idea.

“Well, whatever you want to call it,” said Ms. Pelosi, Democrat of California. “If we are strengthening them, then the American people should get some of the upside of that strengthening. Some people call that nationalization.

“I’m not talking about total ownership,” she quickly cautioned — stopping herself by posing a question: “Would we have ever thought we would see the day when we’d be using that terminology? ‘Nationalization of the banks?’ ”

To answer Speaker Pelosi''s question, everyone who opposed the first round of bailouts thought we would see that day. Expect the nationalization of banks to occur in the next 12 -24 months, and expect other industries to follow shortly thereafter.

Boy, I hope I'm wrong.

Bank of America Credit Card Policy Tantamount to Fraud

Tomorrow Barack Obama will officially become our 44th President, and his top priority will be to deal with the economic mess in which we now find ourselves:

President-elect Barack Obama will demand that banks receiving public support step up lending, top advisers said on Sunday, as they promised to make restoring the flow of credit a top priority for the new US administration.

“I think he is going to have a strong message for the bankers,” David Axelrod, a senior Obama strategist told ABC’s This Week. “We want to see credit flowing again. We don’t want them to sit on any money that they get from taxpayers.”

Lawrence Summers, the incoming director of the National Economic Council, told CBS’ Face the Nation that banks receiving public injections of capital would be “expected to lend above their baseline levels”.

Well, before the federal government hands out anymore taxpayer money to banks, I think they ought to take a good hard look at some of the deceptive, and dare I say it, fraudulent practices of America's largest banks.

Let's just take Bank of America for example. Bank of America is poised to receive another $20 billion in bailout dollars from America's taxpayers:

Two weeks after closing its purchase of Merrill Lynch at the urging of U.S. regulators, the government cemented a deal at midnight Thursday to supply Bank of America with a fresh $20 billion capital injection and absorb as much as $98.2 billion in losses on toxic assets, according to people involved in the transaction.

The bank had been pressing the government for help after it was surprised to learn that Merrill would be taking a fourth-quarter write-down of $15 billion to $20 billion, according to two people who have been briefed on the situation, in addition to Bank of America's rising consumer loan losses.

The second lifeline brings the government's total stake in Bank of America to $45 billion and makes it the bank's largest shareholder, with a stake of about 6 percent.

But, here's the thing... While Bank of America is securing billions upon billions of dollars in bailout money from the taxpayers, they are also scamming credit card holders. To illustrate my point, please read the letter below that I filed this weekend with the Comptroller of the Currency among others:

Dear Comptroller of Currency:

I am writing to request an investigation into what I believe to be an intentionally fraudulent and predatory practice by Bank of America and their credit card division to raise interest rates on consumers who in good faith pay their bills on the due date printed on their statement. Like millions of Americans, I pay the vast majority of my bills online. With the shortened period that most credit card companies are now allowing from invoice date to due date, it seems like the only way to ensure your payment is received by the due date.

On my most recent statement, I noticed that the special 2.99% promotion I was enjoying had jumped to 14.99%. As I always pay my bills on or by the due date, I called Bank of America to inquire what caused the interest rate to rise 500% in one months time. They explained that although my payment was indeed made on the due date shown on my previous statement, December 14, 2008, that it was not processed until the next day, December 15, 2008. For this reason, I was charged a $39.00 late fee and saw my interest rate increase exponentially.

It turns out that December 14, 2008 was a Sunday, and Bank of America does not process payments received on a Sunday.

So, the question is raised, "Why would Bank of America intentionally set a Sunday due date if making payment on this date is going to cause the consumer to be considered late?" When I spoke to the customer service representative, I was told that when I logged online to pay my bill, there was a disclaimer that it would not be processed on time. Of course, by that point in time there is absolutely no way to make a timely payment on the account - because Bank of America purposely set the due date to fall on a SUNDAY. In fact, he told me, even if I had paid the bill on Saturday, the day before it was due according to my statement, it still would not have been processed in time.

On the back of every Bank of America Statement is the following written statement:

Payment Due Dates and Keeping Your Account in Good Standing
Your Payment Due Date will not fall on the same day each month. In order to help maintain any promotional rates, to avoid the imposition of Default Rates (if applicable), to avoid late payment fees, and to avoid overlimit fees, we must receive at least the Total Minimum Payment Due by its payment Due Date each billing cycle and you must maintain your account balance below your credit limit each day.

It does not state that if your Payment Due Date falls on a weekend, you should make your online payment on the business day prior to the Payment Due Date. Each and very statement includes an "Important Information About Your Account" section, and although there are several messages printed, not one of these messages tells you to note that your Payment Due Date this month falls on a Sunday, and you should pay on the business day before in order to remain in good standing.

Now, I am fortunate. I have enough good credit that I'm able to transfer this debt to another credit card company at an equally low rate of interest and avoid falling prey to Bank of America's attempt to defraud. However, I would imagine that in these tough economic times millions of other Americans do not have the same option. As such, and in light of the billions in federal bailout funds that Bank of America has received, I strongly urge you to investigate this practice by Bank of America to purposely set their Payment Due Dates to fall on a Sunday.

Sincerely,

Mario Burgos

Now, keep in mind, I've defended just about every type of lending practice out there. I honestly don't have a problem with lending institutions charging what some may see as exorbitant rates. I believe that the borrower has a responsibility to act prudently. However, this institutionalized practice by Bank of America in an attempt to defraud must be investigated, prosecuted and, I can't believe I'm about to say this... It must be regulated.

Where Will the Stimulus Go?

Congress is expect to throw hundreds of billions of dollars at the collapsing economy in order to turn it around:

House Democrats are circulating an $825 billion economic stimulus measure that emphasizes health care, education and highway construction as well as tax cuts for individuals and businesses.

A summary of the measure shows spending totaling roughly $550 billion and tax cuts of $275 billion, although the totals are expected to shift considerably as Congress works on the bill.

But, it won't work. For the first time since the Great Depression, several generations who have never experienced a serious economic downturn, are going to become conservative in their spending and saving habits. You can give these folks $500 or a $1,000 in stimulus, and all the first thing they are going to do is use it to pay off mounting debt. The second thing they'll do is save it in case the situation gets worse.

To compound problems, the federal money is going to flow down to the states. However, the states, facing serious problems of their own will not spend the money on new projects. Instead, they will use the lion share to fix current budget shortfalls.

This is all doomed to failure, which means several more rounds of economic stimulus will be tried.

We're Officially in Economic La La Land

No, I'm not talking about New Mexico. I'm talking about the official state of the U.S. economy (subscription):

Put it in the history books: The country was officially diagnosed with a job-killing recession Monday, and woeful new evidence showed that it's getting worse. Wall Street convulsed at the news, tanking 680 points, and Washington pledged even more help to try to ease the pain.

With the economic pain likely to stretch well into 2009, Federal Reserve Chairman Ben Bernanke said Monday that he stands ready to lower interest rates yet again and to explore other rescue or revival measures.

Rushing in reinforcements, Treasury Secretary Henry Paulson, who along with Bernanke has been leading the government's efforts to stem the worst financial crisis since the 1930s, pledged to take all the steps he can in the waning days of the Bush administration to provide relief. Specifically, Paulson is eyeing more ways to tap into a $700 billion financial bailout pool.

On Capitol Hill, House Speaker Nancy Pelosi, D-Calif., vowed to have a massive economic stimulus package ready on Inauguration Day for Barack Obama's signature.

Admittedly, I'm not an economic genius, and I don't have the impressive credentials of Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, or the elevated position of House Speaker Nancy Pelosi, but I can do basic math.

The federal government printed anew and then injected 700 billion previously non-existent dollars into the system. It has done nothing to stabilize the economy. Quite to the contrary, it has further destabilized the economy with massive day to day shifts in the market the likes of which we've never experienced before in the history of this country:

The Dow lost 679.95 points to close at about 8,149. There have only been three days in market history with bigger point losses for the Dow—the Monday after the Sept. 11 attacks, and Sept. 29 and Oct. 15 of this year.

Think about that for a moment. Since the Federal government has come to the nation's "rescue" with an "economy stabilizing" bailout, we have experienced three of the worst market declines in the history of the country. Granted, we have also had tremendous upward swings as well during this short period of time:

During the five-day win streak, which began when word reached Wall Street that President-elect Barack Obama would name New York Federal Reserve chief Timothy Geithner as his treasury secretary, the Dow had gained 1,276 points, and the S&P 500 had surged almost 20 percent.

In normal times, the markets might gain that much in two good years, not five days. So analysts said a pullback was understandable.

Analysts say a pullback was understandable. Give me a break. There is nothing understandable about what is occurring. We are gaining and losing a trillion dollars in the market from one week to the next, and in some case from one day to the next. When that is happening, it means that no one knows what the real value of the market is.

Ok, the $700 billion economic stimulus package didn't work - no surprise there. Now, what's the federal government propose to do? Well, the geniuses in Congress are going to solve America's ills by putting another $500 billion into the economy. Yeah, that makes sense.

That's doomed to failure for several reasons, but let me just give you one to consider:

Credit card companies will reduce lending by more than $2 trillion over the next 18 months in a dangerous and unprecedented move for US consumer spending, Oppenheimer & Co.'s Meredith Whitney said.

Lenders that may have difficulty raising capital and want to avoid losses from rising loan defaults are pulling in credit lines, Whitney said in a research note dated Nov. 30.

More than 70 percent of US households have credit cards, she said.

You following this? The government introduces $1.2 trillion in new money, and the credit card companies withdraw $2 trillion. Translation: in about 18 months time, we will have at a minimum $800 billion less in the economy. It also raises the question of who is pocketing that $700 billion that the government gave to banks (aka credit card companies) to keep money in the system.

So, what's this all mean? In the first quarter of next year, we're going to see many major retailers and manufacturers file bankruptcy [Note to self: use gift cards recieved immediately.] By fourth quarter of 2009, that's next year folks, we will have the worse holiday shopping season in the history of the country - 70 percent of US households have credit cards and they're about to lose them.

Of course, like I said, I'm no economic genius, so I guess I could be wrong. What does this all mean for us in the Land of Enchantment? Well, I urge you to pay special attention to how those in the state government opt to spend our money this upcoming legislative session.

Keep in mind that the permanent fund and New Mexico's various pension fund obligations are invested in the market. Our financial concerns are not just about declining tax revenues. In the very near future, we are going to wake up and find that all of the billions we thought were in permanent and pension funds will have vanished through loss of market value and dollar devaluation, and then we've got big problems.

Tucked Away in Bailouts

Just keep this in mind that every time the D.C. folks talk about the urgent need for bailouts:

Tucked in among billions of U.S. taxpayer dollars to bail out Wall Street are a few crumbs for the people — not for the folks who took out risky mortgages or who thought someone else would pay off their credit card bills, but for that tiny slice of America that bicycles to work.

The Bicycle Commuter Act was among hundreds of earmarks federal lawmakers buried in the fine print of House Resolution 1424, aka the $700 billion bailout. It provides a way for employers to give bicycle commuters a whopping $20 a month as a tax-free fringe benefit. It’s not a lot of money, expected to cost the nation a mere $1 million a year, but it has the potential to be a big deal for bike commuters.

Mind you, I'm not against people biking to work, but was giving these folks an extra $20 a month really a priority considering everything facing our nation? I don't think so.

You're Reading the Small Print, Right?

Uh oh, the banking situation is getting worse, not better, and guess who is going to get stuck with the bill not once, but twice:

Citigroup is reneging on a promise it made to tens of millions of credit card customers in good times.

After pledging that it would no longer reserve the right to raise interest rates at any time for any reason, Citigroup now plans to start raising rates for customers who have not had an increase in at least two years. The move appears to backpedal from a commitment that Citigroup executives made to Congress in early 2007 when they tried to fend off greater regulation by promising not to raise rates until an account expires.

Citigroup attributed its decision to the “difficult market environment,” suggesting that the cost of the program — on top of sharp increases in its borrowing costs and severe anticipated losses — cut too deeply into profits. The bank said the policy change would only partly offset a $1.4 billion third-quarter loss for its credit card unit. However, it declined to provide specific figures.

That's right, first the taxpayers are going to have to pay for the bailout for generations to come, and now we get hit with larger fees. This news breaks at the same time we learn that Citi is going to layoff another 50,000 people:

Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) said on Monday it plans to cut about 50,000 jobs as souring economies and global credit conditions cause the U.S. bank with the farthest reach worldwide to retrench. The cuts are expected in the near-term and are on top of the roughly 23,000 jobs eliminated by the second-largest U.S. bank between January and September.

Do I have a problem with a private company making staff layoffs, or increasing the fees for their services? Normally, the answer would be, "No." However, that answer becomes more complicated when the company is a recipient of a federal bailout with my tax dollars.

In these dire economic times, you have to wonder who would want to go into banking? Well, it turns out its hard to find a business that would not like to go into banking. My suggestion, you better start paying close attention to the legalese mailers you get from your credit card companies, or you are going to open a statement and be unpleasantly surprised by the fees you find.

A final note: You can avoid the higher fees if you let your lender know that you reject them and close your account paying off your remaining debt according to the original terms (i.e don't be late). The irony of this is that this means less lending, the precise thing the whole bailout was intended to avoid.

If The Feds Buy Credit Card Debt

It looks like there is going to be a change in how that bailout money is spent:

But Paulson said the administration has decided that the original focus of the bailout program — the purchase of distressed mortgage-backed securities and other troubled assets on the books of banks — will not be employed. He said the administration has changed the emphasis because of a need to get money into the financial system much more quickly because of a worsening credit crunch. Setting up a purchase program for the bad assets was taking too much time, officials said.

Some lawmakers applauded Paulson's switch, saying the administration was finally recognizing that its initial plan was flawed.

"I am glad that Secretary Paulson and the rest of the Treasury team have finally seen the light," said Sen. Charles Schumer, D-N.Y. He said he would still like to see more strings attached to make sure banks use their bailout money to increase loans.

Paulson also said the administration was exploring the possibility of setting up a program in conjunction with the Federal Reserve that would provide support for the $1 trillion market in securities that fund such vital consumer products as credit cards, auto loans and student loans. About 40 percent of consumer credit is supplied through the sale of these securities that are backed by payments consumers make on their credit cards and other loans.

Okay, I was adamantly against the bailout when it was being used to buy mortgage defaults. But, at least there was some sense to the argument that long term the value of those mortgages could increases in value.

But, now the feds are talking about buying credit card, student and auto loans? The first two are known as unsecured loans, which means there is nothing of value backing them up. You can't repossess the meal someone charged on their credit card last week, nor can you take back their education. The auto loans are not much better as they represent loans against an asset of rapidly depreciating value.

If you thought the housing market collapse was bad. Wait until the credit card and auto loan markets collapse, and they will. After all, if people are not going to pay back the loan to keep a roof over their heads, do you really think they'll pay back the loans on their credit cards. Whatever "investment" the government makes in the loans will never be re-couped.

However, probably scarier is the fact that government officials are now admitting that the plan that they hatched less than 30 days ago isn't working. Remember, this was sold to us as "a must happen plan" to prevent the collapse of the economy. We were told that people much smarter than us understood the intricacies of the economy and what would work to stabilize the markets. Now, we're being told the same thing again.

Am I the only one who gets the feeling that the federal government is sitting at a roulette wheel with the last of their savings and saying, "Put it on red. Okay, let's try black. Can I get an advance, I know I'm about to get lucky?"

This all about to get much worse.

Education + Work Ethic = Achievement

A week ago, American Home filed bankruptcy. Yesterday, Circuit City filed bankruptcy - before the Holiday Season with serious ramifications for retail property owners:

U.S. shopping center and mall property owners took a thumping on Monday as investors feared Circuit City Stores Inc's (CC.N: Quote, Profile, Research, Stock Buzz) bankruptcy filing would usher in more failures and take property owners down with them.

It has been reported that next quarter Eclipse Aviation might be closing shop. In China, people are abandoning the cities and moving back to the countryside. This is not just a U.S. recession. This is a major world recession, and giving AIG another $27 billion is not going to keep it from happening.

The government restructured its bailout of American International Group Inc, raising the package to a record $150 billion with easier terms, after a smaller rescue plan failed to stabilize the ailing insurance giant.

The Federal Reserve and the Treasury Department announced the new plan on Monday as AIG reported a record third-quarter loss of $24.47 billion, largely from write-downs of investments.

The new package, at least $27 billion more than was previously extended, will leave the government exposed to billions of dollars of potential losses.

I was on the phone with a friend, and I predicted as a nation we could hit 10% unemployment before we hit the bottom. A bottom I don't expect us to hit until after the 4th Quarter of 2009. This year's retail holiday season could be one that shrinks for the first time in a long time, and my guess is that next year will be worse.

I'm a naturally optimistic guy, but there is a difference between being an optimist and a dreamer. Now, I do have one really big fear - newly elected New Mexico Democrats will overreach. Contrary to what some folks might suggest, I don't think the Democrats need to "shut up about winning the election and go about maintaining the status quo."

They won, they're entitled to try their way. After all, campaign promises were made, and they are going to have to try and deliver on some of them. That's not the problem. I think it's a mistake, but hey, I'm obviously in the minority. The real problem is if they try and deliver on ALL of them. It is not possible.

Take cap and trade legislation on oil and gas for instance. I've mentioned once before that this was on the table for the legislative session. The thing is, there couldn't be a worse time than right now to pursue this type of the legislation:

"If policy makers ignore the global nature of climate change, it will drive U.S. companies to relocate overseas to low-cost nations where there is little or no environmental regulation," Mullikin said. "This relocation fails to accomplish the goal of reducing global greenhouse gas emissions, and will likely make global emissions worse."

For example, Mullikin said that China's carbon dioxide (CO2) emissions increased more in one year (2006-2007) than U.S. emissions have increased in the last decade (1997-2007). In 2007, China passed the United States and now accounts for 18 percent of the world's CO2 emissions, releasing over 800 million metric tons more CO2 than the United States last year.

The shift of clean, regulated American industry to nations with little to no environmental regulation will result in lost U.S. jobs. Proposals like a cap and trade program will also increase energy prices for consumers.

A study by the National Association of Manufacturers showed the potential impact that federal cap and trade legislation could have on New Mexico, particularly if developing nations do not agree to reduce their emissions:

• New Mexico is at risk of losing over 11,000 jobs and up to $1.2 billion in gross state product by 2020;
• New Mexico's household income could decrease by almost $2,300 a year by 2020;
• Electricity prices in New Mexico are estimated to increase by up to 133 percent by 2030, while gasoline prices are estimated to rise by up to 140 percent.

Can you imagine the loss of 11,000 jobs and $1.2 billion in gross state product on top of the economic recession/depression we are about to experience? Four or five years from now, while the rest of the country is experiencing an economic rebound, New Mexico could very well be falling further into a depression because some folks decide to regulate and tax our biggest economic contributors out of existence.

That's my greatest fear.

Of course, there is a light at the end of the tunnel. And, it comes from an interview that Peter St. Cyr did with Democratic State Treasurer James Lewis:

Lewis tells us he's looking at the election of the 44th President of the United States in its historical perspective. He says the country has come along way since the Jim Crow laws, used to block African Americans from voting. Lewis even reminded us that before the 1965 Voting Rights Act his relatives were prevented from voting because they didn't know how many "bubbles were in a bar of soap."

"This is a proud moment for me," said Lewis. "It's a sense of achievement."

Lewis says any young person who goes out and gets a good education and has a strong work ethic can achieve anything they want.

We have come a long way, but let's not forget how we arrived here. The secret is in Lewis' last sentence above: education + work ethic... not government bailouts and additional regulation. If more Democrats keep this in mind, we just may be okay.

Federal Government Intervention to Hit New Heights

Or could it be called New Lows?

With the country continuing deeper into a recession, it is expected that one of President-elect Obama's first actions will be to work with Congress to expand a second round of bailout packages (subscription):

Obama was elected on a promise of change, but the nature of the job makes it difficult for presidents to do much that has an immediate impact on the lives of average people. Congress plans to take up a second economic aid plan before year's end — an effort Obama supports. But it could be months or longer before taxpayers see the effect.

Don't be fooled. They may call it a "second economic aid plan," but the ugly truth is that it is the nationalization of yet another industry - the automakers:

In late breaking news, Treasury Secretary Paulson has announced a new plan to expand TARP coverage.

Congress was behind the push as Pelosi, Reid Press for TARP Aid for Auto Industry.

House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid sent to send a letter to Treasury Secretary Henry Paulson urging him to assist the Big Three auto makers by considering broadening the $700 billion Troubled Asset Relief Program to help the troubled industry.

The two top Democratic leaders in Congress are likely to make the request in a letter to the White House, which could be forwarded as soon as Saturday afternoon, said individuals familiar with the matter. President-elect Barack Obama is generally supportive of the appeal, but at the moment is moving on his own track to assist the industry, these individuals said.

Mr. Obama is scheduled to meet with President George W. Bush at the White House Monday.

Though the administration is reluctant to widen the program to cover autos, there has been discussion among Bush officials of expanding use of the $700 billion to buy equity stakes in a range of financial-sector companies, moving beyond just banks and insurers. The focus would be on assisting companies that provide financing to the broad economy, such as bond insurers and specialty finance firms such as General Electric Co.'s GE Capital unit, CIT Group Inc. and others, individuals familiar with the matter said.

I doubt this will all have an immediate effect on the daily lives of you and me, but make no mistake the impact of these flawed decisions will impact the lives of our families for generatiosn to come.

The Cause of the Economic Crisis Explained

Once before I put up a British comedy to explore the arguments for and against school choice.

In the same vein, here is a look at the root of the economic crisis we are facing:

U.S Senate is Out of Touch

The Senate voted overwhelmingly for a bailout bill, and at the same time they took advantage of "the ecnomic crisis" to help some their favorite pet projects to some pork. That should convince you that it is business as usual in the U.S. Senate, and I hope the people's representatives in the House don't lose their backbone when it comes time to once again vote this bill down.

No Still Means No

The bailout plan failed, and contrary to the predictions of those in Washington, the world as we know it didn't come crashing down around our feet. So, what did we all do? We went about our daily business knowing that we would have to tighten up our belts and control our personal spending.

What did those in Congress do? Well, they decided: If at first you don't succeed, try, try again:

[House Republican Whip Roy] Blunt said one of the reasons he is more optimistic is that lawmakers are hearing less vocal opposition from their districts. He said that calls and e-mails to congressional offices that were running about 90 percent against the measure earlier now are at about "50-50."

Really, it's now "50-50." Any chance that's because we already told you how we felt, and now we actually have to make a living. Let me try and explain this for our Congressional Representatives the way I would explain it to my kids.

"I told you 'no' already, and I shouldn't have to keep telling you 'no.'"

Does Congress really think that 40 percent of the American public has changed their mind since last week? Why would we do that? What would be the cause. Nothing has changed for us. Everything is the same. We spoke loudly last week, and in a surprising turn of events, the Congress actually acted as Representatives of the people and voted down the bailout bill.

Now, if you want to go ahead and increase the FDIC insurance level, knock yourselves out. But, if you want to bundle that with a Wall Street bailout, please let me be clear... My answer is still a firm and resounding, "NO."

Federal Bailout is Wrong

It's kind of hard to argue with the logic shown in the video above. It was produced by Freedom Works, and I couldn't agree with them more. Here is an excerpt from an email they sent to me today:

Last Thursday the House of Representatives voted 266-154 to advance a $300 billion program of taxpayer-financed mortgages to home speculators and their lenders.

The bill does not protect taxpayers. The bill gives six-figure taxpayer loans to people who have terrible credit scores and to people who have made fewer than 12 payments on their existing mortgages. The bill even provides these taxpayer handouts to non-citizens. The plan lets banks cherry-pick the worst loans in their portfolios and sticks taxpayers with 100 percent of the risk.

However, our "Angry Renter.com" campaign is making a difference and the opposition is growing to this bailout plan. Renters and responsible homeowners are the "forgotten man" of this debate, as Rep. Tom Feeney of Florida put it in his speech on the House floor.

Can you help spread the news about this legislation so we can stop it?

On Tuesday President Bush came out strongly against the bill, saying "First of all, we are committed to a good housing bill that will help folks stay in their house, as opposed to a housing bill that will reward speculators and lenders. I will veto the bill that's moving through the House today if it makes it to my desk."

Even though the bailout bill passed the House, it was not by margins large enough to override the president's veto.

This week the battle turns to the U.S. Senate.

There, Senator Bunning of Kentucky is leading the charge against a flipper bailout in the Finance Committee. Senate rules make it easier to offer amendments, so we should see greater debate about the risky and unfair aspects of the bill.

FreedomWorks has identified five key senators as targets on the housing bailout bill. Please take a moment to call them and urge them to oppose this flawed piece of legislation.

Sen. Dole: 202-224-6342
Sen. Bennett: 202-224-5444
Sen. McConnell: 202-224-2541
Sen. Bayh: 202-224-5623
Sen. Carper: 202-224-2441

This is a great opportunity to encourage your friends to get involved. These issues affect everyone and a robust opposition has the power to do great things. Ask your friends to sign the Angry Renter petition, and to join you in calling their senator.

Well friends, I'm asking you to sign the Angry Renter petition. Now, I don't rent, but trust me when I tell you, I have been impacted by the collapse of the housing crisis as much as anyone. However, I'm not looking for any federal bailout, and neither should anyone else.

Bailouts Are Wrong

I understand what the Federal Reserve is trying to do, but bailouts are just plain wrong:

The extraordinary measures were made necessary, in the view of the policymakers, by the most dire threat facing world financial markets in years. Bear Stearns, in particular, was confronting a run on the bank as investors were too fearful of the future to make even overnight loans to the nations' fifth-largest investment firm. If it had been allowed to fail, senior officials believed, it would have created a cascading crisis of confidence that could well have brought down several other leading firms and dragged world markets with them.

Policymakers weighed that risk against the risk that their actions would create "moral hazard," or greater willingness of companies to take inappropriate chances. The officials stressed that their efforts were meant not to save shareholders of Bear Stearns or any other company but to keep markets from collapsing.

I don't pretend to be a financial analyst, but the Dow was way below 10,000 just five short years ago, and we can expect it is going to continue to fall from it's current position. We can also expect to see more major banks, mortgage companies, homebuilders and investment firms to collapse. The Federal Reserve Bank is not going to be able to bail the all out, and they should not have bailed out Bear Stearns.

This is not the first time we have had a financial industries correction based on over speculation in land development, and it surely will not be the last - especially if the federal government continues its commitment to bailouts.