The news is out. Libyan rebels have taken most of the capital and captured three of Gadhafi's sons including his heir apparent, Saif Al Islam, who promised that the streets would run with rivers of blood before his family gave up power.
Monday, August 22, 2011
Posted by Raised By Republicans at 4:34 AM
Monday, August 15, 2011
Sunday, August 14, 2011
The recent downgrade by the S&P of US debt was lousy, but it was a wake up call. US citizens have too much debt- and it isn't all their fault. College tuition is rising faster than inflation. It's keeping pace with medical care. It's a crisis in the making, a real catch 22. So students take out loans for tuition then put their text books on credit cards. Hello!
Now the next big debt bubble: Student Loans- largely fueled by for-profit institutions. Problem here, folks, is that there is no way out for the borrows. Waltz on over to MyBudget360.com for a very good article on the next crash.
That was the morning coffee conversation with my fiance this morning. Then we went grocery shopping and we were having a conversation with the clerk. She and her husband are having trouble paying their mortgage. So they called the bank to see about renegotiating their 6% interest rate into something lower. The bank informed them that to do this, they would have to reassess the property and that they are not currently assessing property. End of conversation. She and her husband told them that they were considering strategic default. This had no effect on the bank. (People in my part of the world are rather open about their finances-oddly enough.)
After leaving the grocery store, my finance and I started to figure out what perverse incentive was keeping the bank from a simple re-negotiation. Of course, this has been written about all over, but not by me. So my turn. This is what we realized:
1) Banks don't pay property taxes on the homes they are holding.(thus the strapped states and counties)
2) Banks can keep inflated assets on their balance sheets, thus not having to recognize their losses to investors. The idea is to keep investors interested in Bank stocks. But investors have been bearish on banks stocks because of the confusing about what these banks actually hold on their balance sheets and because banks are keeping larger cash slush to cover bad debt,
3) Banks collected on the PMI. In other words, they got the insurance money on the loss.
4) all told, even if the bank tears the house down, they've made more money on it than they would have if they sold the houses at a loss.
The way this works is that the bank will foreclose. Then the house is supposed to go to auction. So the bank will bid whatever price is equal to the outstanding mortgage. Of course, the outstanding mortgage is usually based on very inflated prices. So the bank usually wins the house at auction. Then the county tax collector sends the bank a bill for the outstanding taxes, the banks asks for a deferment until they sell the house. Without the proper legal remedy, the tax collector agrees to to the deferment. But then the bank holds the property off the market, not wanting to further deflate prices with overstock.
So in the end, the original owner has a great incentive to walk away- believing that in 3 years he will be able to buy a new house at a cheaper price. The banks on the other hand were hoping to see interest rates rise. But the Fed just told them not to hold their breath. So score 1 to the people.
We need to start putting banks back in line- charging them property taxes and putting bans on their ability to package student loans into securities. They also need to change the rules on student loans. At this point, I must start to agree with those conservatives who point out that student loans encourage sharking by universities and colleges- particularly the for-profits. Loan limits need to be set lower. And students should be given a 20 day grace before interest accrues on their loans, like credit cards.
Posted by USWest at 12:24 PM
Tuesday, August 09, 2011
London has finally managed, more or less, to put an end to three nights of rioting which has also spread to other cities. The cause of the rioting is not specifically known. From across the pond, I think the reason for the rioting is not hard to discern. Teenagers have seen a massive economic collapse, their futures effectively taken away from them (in the short timeframe of youth) and nobody has yet paid for it. A kid who was 14 in 2007 saw a crash when he was 15 and is now trying to get a job at 18, with none available. This is not a specific riot over a specific thing. It is the result of an alienated and disaffected generation that is angry at society at large and sees nothing in government, church, or school that would connect them to civil society. The best analogy is to California hills in recent years that are full of unburnt fuel (trees and brush) from years of bad forest management, bone dry and ready to ignite.
Eventually, there was bound to be some violence in response to what I would call the economic violence perpetrated by bankers against the middle classes of the developed world. In London, it appears to be low scale rioting by kids. In the USA, it is taking on the darker hues of the Tea Party, a group not dissimilar to emotional teenage rioting but much more dangerous. Or random violence such as the shootings in Tucson last January. As I said to people two weeks ago, the main desire of Tea Partiers was to see an actual default by the Federal Government and the chaos that would follow: "Burn, baby, burn!" There will be blood. This was to be expected. Lucky London that it is all so mild and juvenile. Greece has not been so lucky.
Posted by The Law Talking Guy at 7:26 PM
Monday, August 08, 2011
My opinion on this is pretty strong. Ratings agencies should not rate the credit worthiness of governments. Governments are more like non-profits. They serve a social purpose. They should not be treated like businesses. The logic of the downgrade has little to do with finance and more to do with Congress. From the S&P press release:
"More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011. Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon."
The S&P should not have any power over the government finances of the United States, the hand that feeds it, the nation that allows it to exist, that provides the environment under which it thrives. This is a prime example of the corporatist model gone awry.
This is aside from the fact that the ratings agencies have had terrible track record. Didn't they give AAA ratings to toxic bonds?
I am just cynical enough to believe this is political gamesmanship.
Posted by USWest at 9:36 AM
Thursday, August 04, 2011
In our last post, we debated a little about whether the Tea Party was really a 3rd party or just a passing fad. I found this map at Patchwork Nation. The map is interactive. So go to the site and take a look.
What jumps out at me is that there are varying degrees of support for the Tea Party, but that this support is widespread, even if the numbers are relatively small in individual counties. It remains to be seen how this will play out in the next elections.
Posted by USWest at 2:23 PM
Monday, August 01, 2011
There are two lessons about this deal that most Democrats seem to be missing. First, in any "divide the dollar" type negotiation, the side that is most willing to see no deal take place has a big advantage. Second, the side that makes the proposals has a big advantage. In this case, both of those advantages were with the Republicans. We should expect, based on those two factors alone, that the Republicans would be able to get almost all of what they wanted.
Posted by Raised By Republicans at 9:42 AM