POOR BARNEY AND BETTY!

Don't you feel sorry for poor old Barney and Betty. They live in a modest home, earn a modest living and pay their modest bills; and, they pay and pay and pay for government, government and more government. Their Congressional "Representatives" constantly spend more than Barney and Betty send, pushing up their cost of living. Barney and Betty are paying for things they would never buy if their "Representative" did not require it of them. Barney and Betty are paying through the nose for the home mortgage taken out by Fred and Wilma. Also, for 30% of the windmill that Fred put in his back yard. You are paying your share too!


BAILOUT -- WILL IT PASS OR SHOULD IT PASS?


The bail-out will ultimately pass, because Hank Paulson will put a few more banks out of business if congress does not go along. The bail out is nothing but another pork barrel spending project. With the stroke of a pen, the administration and the congress could solve the current financial crisis, without spending tax dollars. The best idea, so far, is to allow banks to amortize the decline in mortgage backed securities over a 5 or 7 year period. In other words, modify the Sarbnes-Oxley mark to market rules. The banks are only suffering because they do not wish to sell securities at fire sale prices.



As a property owner at Myrtle Beach, I am well aware of the temporary death of markets. In Myrtle, almost no ocean front condos are being purchased, relatively few are being rented. Does that mean these condos have no value? Of course not. I watched this same movie in 1974 and in 1991. There is no market now, but there will be a market soon. My Dad always got a laugh when real estate agents tried to sell him on the idea that you better buy ocean front now because the Good Lord is not making anymore ocean front property. During my life, I have witnessed Myrtle go from a 2 mile "strip" to a 60 mile "strip". Those who buy now, will see a huge gain within a couple of years.


In the same way that I have avoided selling beach property at fire sale prices, banks are reluctant to sell their mortgage backed securities. The fact that Paulson is cranking a siren and screaming fire in a crowded theater is not a good reason to sell. His old firm, Goldman, is accumulating a war chest in order to buy as much as it can. Besides, if all the current delinquent loans in America were to go into foreclosure, the net loss to all the banks would be less than the $700 Billion bail out. Paulson is setting Goldman Sachs, Morgan Stanley and other "big boys" up to make a killing.


Morgan Stanley and Goldman have just converted to bank holding company status. Each has just raised billions of new dollars in capital. Morgan got one chunk of its new capital from Japan. Goldman sold Warren Buffet a $10 Billion stake. Leverage $10 Billion through the FOMC and Goldman suddenly has an extra $130 Billion with which to go shopping. Goldman will buy banks selling at 15 cents on the dollar. The $130 Billion will buy $867 Billion of banks. The bounce from $130 Billion to $867 Billion or $737 Billion will be a nice profit on Warrens high priced loan of $10 Billion.


TO BE FAIR


To be fair, we must always remember that this crazy deal got started way back when. Paulson was not the one who set up the government corporations of Fannie Mae and Freddie Mac. Nor was he the one who let them run wild. Two years ago, Paulson was happy making $200 million dollars per year as Chairman of Goldman. He was not happy having to compete with government subsidized behemoths, but he was doing a great job of making money in a tough environment. He left his 200 Million Dollar per year job in order to "fix" the problem, for the benefit of Goldman and for the benefit of America.


In 1999, Bill Clinton in cooperation with the US Congress, pressured Fannie and Freddie to allow anyone and everyone to borrow excessively to buy a home. This train had such momentum that it did not even slow down during the 2000 recession, housing sales were strong throughout the recession. The Bush administration and the Republican Congress did little to slow the train down. McCain suggested tightening the rules on Fannie Mae in 2005 but he was ignored and most of the damage had already been done. Many people borrowed $200,000 to buy $150,000 houses in 2004 and 2005.


Poor old Barney and Betty, Fred borrowed $200,000 to buy a $150,000 house, the bank wants the $200,000 back but Fred does not have it. Barney and Betty have already contributed part of the $300 Billion that the government is using to reduce Fred's payment. Now the government will take the banks position in the hope that Fred will keep making the reduced payments.


THE ANSWER IS A SMALLER GOVERNMENT!


A lot of people think that all politicians are corrupt. The fact is that principled people, such as Thomas Jefferson and Alexander Hamilton, did a lot of "horse trading for votes", as do politicians today. The majority of the politicians who authorized excessive lending were not crooks, the bank that lent Fred the money was not crooked and Fred was not a crook.


The politicians compromised on a plan to "help the poor". Whenever the government gets into the business of charity, there are always problems. Governments should adopt the Credit Union Motto of "Not for profit, not for charity, but for service".


We will never get away from the art of compromise. We should not even try. However, we should severely limit the amount of money the government has to fight over and spend. Most importantly, we should keep the government "out of business". Regulation is needed but the government should not be in competition with its citizens. In the days of George Washington, government was too small. George had a tough time defending the country because funding was limited. We have not had that problem for a very long time. Now-a-days, no matter how much money the government has, it does not seem to be enough.


For just a moment, think about our arcane practice of mail delivery. We live during a time when a power bill or letter can be transmitted to a customer for a tiny fraction of a penny. Instead, we put these power bill and letters into planes, trucks and cars and drive them around at 100 to 1,000 times the cost. But first, trees are cut down to make the paper and toxic chemicals are used to make the ink and the paper. Pollution from the manufacturing of the paper and ink (and the glue on the stamp and envelope) and from the production of the trucks, airplanes and cars and from the pollution spewed from these airplanes, trucks and cars literally kills birds, fish and people. Pets and people die as a result of the traffic. Congestion and accidents are caused by cars stopped half-on and half-off of roads. We live during a time when people fight bitterly over "global warming fact and fallacy" while paying dearly to contribute to the "process".


If the post office were run as a private, non monopoly business, it would have been dramatically changed years ago and the savings would have been enormous. After careful analysis, the "new postal service" would declare a new plan. For example, the new plan might be that the price of postage would decline from 43 cents to 30 cents on January 1, however, home delivery would occur only once per week. The idea being that everyone would immediately save money. There would be a fuss but those who really must have daily delivery could rent a daily box at the local post office. Many people would quickly learn to get by on once per week delivery. Most of us would use electronic delivery more.


Even the once per week delivery would be a transitional step. There are already free computer classes available at public libraries. A lot of people who are frightened by the thought of operating a computer would buy one and be better off for having done so.


For hundreds of years, there has been a constant complaint that the earth resources are about to be used-up. The fact is that the smarter we get, the fewer the resources we use. For example, we heat food in a microwave oven for a very tiny fraction of the resources used in the old days and the older days. One fact is that we, unnecessarily consume billions of pounds of paper daily. Private enterprises still deliver newspapers but this arcane practice would die a much quicker death once most people started reading their bills and news on portable readers.


The headlines about the new G1 phone have generally said that this new phone is not a "game changer". The headlines were wrong. Today, only a relative few people check their email, surf the net, read books and news and get travel directions from their pocket computer phones. Soon there will be a large number of hand held pocket computer readers on the market, designed specifically to make mobile surfing practical and even necessary.


POOR BARNEY AND BETTY!


Yesterday, the Senate made another huge compromise. Democrats gave up on pushing for the continuation of the US drilling moratorium in exchange for a package of "goodies", 68 Billion Dollars worth of sweet candy. As a result, Barney and Betty will pay lots of money to the government which will give lots of money to "responsible businesses" which will install very expensive solar panels before advertising about how "responsible" they are. How perverted can the congress become? Does it make any common sense for Barney and Betty to subsidize GE?


How about the $7,500 that Fred will collect for buying a plug-in car? Should Barney and Betty be forced to help pay for Fred's car? A car that pollutes and is wasteful and inefficient?


OH WELL!


The good news is that the drilling moratorium is over. The supply of oil and gas is going to increase. Those who have been hoarding oil and gas have reason to reduce their inventories. They may want to wait just a little while.


The USA and Israel seem ready to turn a blind eye toward the 10,000 Syrian troops that are gathered next to the Lebanese border. The "pending invasion" is a part of the "plan". Syria is supposed to assure Israel that it can make peace with Lebanon and Syria and not have to deal with constant rocket attacks by Hezbollah.


The Afghanistan sorties being flown from the USS Ronald Reagan, which is parked in the sea below Iran, provide a daily and nightly reminder of the presence of US forces near Iran. Jed Baddin is probably correct in saying that Bush "needs" to do something about Iran. The UN 5+1 will meet again tomorrow to discuss the next step. Time is short. Tensions are high.


Even so, oil is in plentiful supply. Most of the US refining capacity lost due to hurricanes is back on line or about to come back on line. Democrats hope to put a new ban on drilling in force, after the elections. Not gonna happen!


Poor Barney and Betty are tired of paying to subsidize windmills. Taxes on oil and gas just went up again but enough is enough. The price of oil and gas will gradually come down. New supplies will continue to come on line while new nuclear power plants coming on line in numerous countries will reduce demand. Lower energy prices are ahead. Bank consolidation is ahead. The fight for congress to get out of town is no longer about drilling. It is now about another big pork barrel spending project.