Have You Ever Seen Scanners?

Due to my recent head explosions I had been unable to keep current with my posts. This happened the instant that I heard that the governement (that is, we the people) bought out Fannie Mae and Freddie Mac. After I pieced my head back together and cleaned the walls I hear that we also bought AIG. That was when this photo was taken. I have now fully recovered, but the walls are a lost cause. I'm going to Home Depot for some red paint. I honestly had no idea what the hell Fannie and Freddie did until after I bought them. After a week of research I guess I know what they do, but I sure as hell don't understand it. I'm not going to take up all my blog space with details. They take the value of existing mortgages as collateral for new loans. Let that soak for a moment. They use other people's existing loans as collateral for new loans. Let me use a smaller scale example to show how absolutely crazy this is. Let's say that I want to get a loan to buy a house that costs $100,000. I walk into the bank to talk to a loan officer. I have no down payment, no credit history, no assets, and no cosigner. However, there are five people that live on my street who have $100,000 mortgages for their houses in different banks in town. Each of those other people have paid in $20,000. To secure my loan, I tell the loan officer to "purchase" those other five loans from the other banks. So, my bank pays the other banks a total of $500,000 plus a little interest to purchase the other loans. Those other five people still pay their own banks and have no idea this happened. Since each loan has $20,000 in equity, my bank now has a total of $100,000 in equity, which they give to me to purchase my house. So now my bank has $500,000 in liability and zero assets. The other five banks still count each original loan's $20,000 as their equity. My bank now relies on the other five borrowers and me to make our montly payments to bring in assets. If just one of us forcloses, the bank resells the house. With the housing market no longer overvalued, it can only sell the house for $85,000. That means the bank just lost $15,000. If my bank hadn't given me my loan, the bank would have actually profited $5,000 since the original loan had $20,000 paid into it. That sounds like a pretty bad situation doesn't it? But wait, it gets worse. Much, much worse. Let's throw in some varibles. Let's say the guy that forclosed actually had taken out a second mortgage to pay his credit card bills, buy a boat, or just spent it on hookers and booze. So the original note of $100,000 became $140,000. Now the bank lost $55,000. But it couldn't get any worse than that, right? Well, Congressional Democrats (including the entire Presidential ticket) want that person who foreclosed to keep his house. That means the bank can't resell the house. That means a total loss of $120,000 on a house that was originally only valued at $100,000. And the bank has zero assets and still has another $400,000 (or more) in liability. Hooray, Democrats. Now, to understand why Frannie and Freddie were "too big to fail," just change the $500,000 total liability in the above example with $6,000,000,000,000. We must also understand that when Frannie and Freddie "purchase" these loans, they never leave the books at the banks from which they buy them. The actual consumer never knows that their equity was used to secure loans for other people. So, when you take out a second mortgage, you're actually taking out a third mortgage. In the above example, the bank that originated the loan currently has the right to collect the $20,000 of equity from my bank in the case of a forclosure. If Frannie and Freddie closed shop, it would mean that half of the home equity in America (that's $6,000,000,000,000) would just disappear out of banks all over America. So, you and I have oficially purchased these two brilliant companies. But what you didn't know is that they had already taken every ounce of equity you thought you had in your home. They took it to loan it to other people. And the insanity of it all is that even with government control, they show no signs of stopping this practice. This system was originally designed to help poor people secure loans to buy modest homes. Today, it is being used to secure loans to buy wealthy people (including many politicians) multi-million dollar mansions that they could even pay for in cash. Now this system is not limited to just Fannie and Freddie, they compose only half of the secondary mortgage market. That means there is another $6,000,000,000,000 out there in secondary mortgage companies with palms outstretched. So those talking heads that say this buyout will cost taxpayers over $1,000,000,000,000, get ready to purchase the other half soon. Now, I've always said that I don't deal with solutions, but I have a little more to say. These companies may be too big to fail, but this system is far too insane to continue. We may not be able to close them down, but for the love of all that is good and pure, heed the words of Lemonhead from The Shield. "Why can't we just do what we're supposed to do and stop?"

Speaking of Unemployment

I've been without a job before. It's not very nice. But you do get the chance to watch some soap operas. Today, the Bureau of Labor Statistics announced that unemployment rate rose from 5.7% to 6.1%, an increase of 0.4%. That's a pretty big jump. 0.4%. Let's remember that number. We might see that same number (0.4%) again later in this post. And there will be a quiz at the end, if you get that far. Given what I've read today, I will make a bold prediction. Unemployment will also increase next August. I feel comfortable with this prediction because of what I read on the Department of Labor's website about the Fair Labor Standards Act. Effective July 24th, the federal minimum wage went from $5.85 to $6.55. Next July 24th, it will increase from $6.55 to $7.25. Go ahead and plan which soaps you want to watch. The group that is most hurt by minimum wage increases are actually the minimum wage workers themselves. Any business owner will tell you the easiest way to cut costs is to cut payroll. And who is easier to fire, the experienced and skilled worker (and union member) or the new minimum wage earner (non-union)? Every business in the country will cut loose the new guy, who is usually employed by a temp service anyway. In fact, as unemployment increases so does productivity. When minimum wage earners are sent home, who picks up the slack? Who gets overtime pay? The experienced and skilled union member. Many union contracts also base salary relative to the minimum wage, meaning that an increase in minimum wage also increases those high wage earners under the contract. That happens whether they make $7 per hour or $27. So, union workers get a pay increase and an increase in hours worked while those poor folks who can't earn a living wage get booted to the curb. Let's study the current and relevant statistics in the BLS report. I claim that increases in the minimum wage result in unemployment. But is there anything in the BLS report that would support my claim? Well, the report does mention an increase in hourly earnings during the month of August. It's right there in the first paragraph. In fact, hourly earnings rose during August by 0.4%. Here's your quiz: what else went up by 0.4% in August?

Bad News Is Good News

Liberals depend on negativity and crisis to promote their ideals. Unemployment figures released today were higher than expected, and Obama was quick to jump on that statistic for political gain. That's just what liberals do. That is not going to change, but it really makes me hostile. One of the earliest lessons on leadership I ever learned was that you give credit when things are good and accept blame when things are bad. When a Senator hears that unemployment has gotten worse, a real leader would ask himself what he had done to contribute to this problem and what they can do to make it better. An immature and incompetent leader would blame others for the problem. A mature and competent leader would not point fingers at others for the problem. Let's see how Obama and McCain reacted to today's unemployment news and which one is mature and competent in his leadership abilities. Obama: "Today’s jobs report is a reminder of what’s at stake in this election – John McCain showed last night that he is intent on continuing the economic policies that just this year have caused the American economy to lose 605,000 jobs. John McCain may believe that the fundamentals of our economy are ‘strong,’ but the working men and women I meet every day are working harder for less, the typical working age family’s income is down $2,000 since George Bush took office, and their purchasing power is as low as it’s been in a decade. John McCain’s answer is more of the same: $200 billion in tax cuts to big corporations and oil companies, and not one dime of tax relief to more than 100 million middle-class families. If I am President, I will cut taxes for 95% of all working families and provide an immediate $50 billion to struggling states so that they don’t have to cut back on health care and education and can rebuild roads and schools. That’s the change working families need right now." Please notice that Obama blames Bush and by extension McCain. He not only dwells on the negative, he rejoices in it. Then what does he say about creating new jobs? Nothing. He will cut income taxes (how much? 50 cents?) for 100 million families (while increasing every other tax those families pay, whether directly or inderectly). That doesn't create any jobs. He will spend $50 billion on poor states. Again, that doesn't create any jobs. Now, McCain: "Americans are hurting and we must act to create jobs. Unfortunately, while millions of Americans are gathering around the kitchen table and questioning how they can keep their homes, pay their medical bills and afford their children’s education, Washington has failed to act. As I promised last night, I will fight for those that lost their jobs, savings, and real estate investments. Some Americans have been left behind in the changing economy, and it often seems your government hasn’t even noticed. We must prepare every worker for the jobs of tomorrow. We will use our community colleges to help train people for new opportunities in their communities. As President, I will enact a Jobs for America economic plan that creates jobs, helps small businesses, expands opportunities and opens markets to American goods. Washington must stand beside the American people, not in their way." McCain doesn't point fingers. He offers solutions. He acknowledges the negative, but doesn't dwell on it. And his solution? An economic plan that creates jobs, helps small businesses, expands opportunities and opens markets to American goods. What kind of plan could achieve all that? Tax cuts of $200 billion for American businesses. A tax cut that is designed to help America, not get votes. I guess McCain would rather see America's economy strengthened than win an election. Sounds a little like McCain's stance on the troop surge a while back. It sounds like leadership.

Crawling From the Pit of Despair

Sometimes hostility can wear on one's soul. As the pillars of tyranny climb higher toward the sky and the enemies of freedom gain strongholds against its champions, the hostility seems an exercise in futility. When the warriors see their countrymen aiding the enemy in their conquest of freedom, it is hard to fight the tempation to lower your weapons and retreat to the safety and peace of your homes. You turn to ignorance and apathy to comfort you. No more 24 hour news, no more newspapers, no more blogs. Just the pleasantries of a simpler life: pulling the arms off a lego stormtrooper, watching Gene Simmons get a facelift, plotting along with Stewie Griffin, scouring the web for interesting videos, making salsa, whatever floats your boat. Then reality comes knocking when McCain announces his running mate, Sarah Palin. An actual conservative who seems to want the same thing I want: a government that will leave us the heck alone. At that time, I started paying a little more attention. After her speech yesterday, I became interested in the campaign again. After McCain's speech tonight, I'm practically excited about it. I still don't belive for a second that the government can solve our problems. But I do believe that Obama is more of a threat to freedom than is McCain. In fact, it seems that McCain/Palin could possibly restore some of it back to us. So after two months in the pit of despair, I am crawling out of my hole to renew my efforts to express and promote my hostility to the world. I have no expectations to change it, but I will fight to keep it from changing me.