Presidential race will be determined in the next few days in my opinion
Republican Presidential hopeful John McCain is staking his campaign on one issue. He is suspending his campaign to return to the Senate and discuss and vote on the 700 billion dollar bailout.
I have been disgusted with Obama, McCain, and Biden for not doing their jobs as Senators and instead running for President and Vice President.
I have a prediction to make for you.
If McCain returns to the Senate and leads the fight to defeat this 700 billion dollar boondoggle he will be the next President of the United States. He can distance himself from the Bush Administration (Since they are desperately pushing this measure) and he can get the full support of American conservatives.
Unfortunately for McCain, I do not think he understands how socialist and bad for American this plan is and I actually think he will join with the Bush Administration and he will support a modified bailout plan that will move American further towards Socialism.
If McCain supports the bailout plan I think Obama will be the next President because McCain will strongly irritate conservatives!
Mike Sylvester
How the current financial crisis occurred, part 4
The current financial mess was created by several things. This is the fourth post in a series of posts discussing many of the items that caused this crisis.
The mindset of Americans has changed in the last thirty years. People used to plan on paying off their homes in a reasonable amount of time and they made reasonable down payments. Thirty years ago few Americans would have even considered an interest only loan.
The American mindset has changed so much that Americans are incurring huge mortgage debts that they would not have even considered thirty year ago.
The mindset of Americans has changed for many reasons including:
1. The Government is doing everything it can to convince Americans to purchase homes and spend their money on all kinds of items in order to grow the economy.
2. Realtors, Mortgage Brokers, Banks, and lending institutions have done everything they can to convince the public that home ownership is the key to wealth and that the real estate market will always go up.
3. The Government has made mortgage interest tax deductible if you itemize your deductions. This has allowed people to incur even more debt due to the tax savings.
4. Our culture has changed. Many Americans are interested in keeping up with their neighbors, friends, relatives etc.
5. We have become a “charge it” culture rather then a “lay-away” culture.
6. Interest only loans have grown in popularity along with loans with little or no down payment. There are many financing options available today that were illegal 30 years ago.
In short Americans have decided to purchase more expensive houses then they can afford and they have done it mainly through mortgage debt. This has been encouraged by the Government. Lenders have lowered their lending standards (Much of this was forced by the Government).
Even worse many Americans have continually been taking the equity out of their house. Please go back and read my post from March 3rd about this topic. Pay particular attention to my statement where I predicted: “In the last few days I have modified my predictions about a recession. I used to be convinced that a massive recession was coming; however, I was not sure if it would hit us in a few months or in a few years. I now feel that it will hit us within the next five years. I feel this recession will be nearly as large as the “Great Depression.”
Since so many Americans have taken the equity out of their homes that has allowed even more home owners to default on their mortgages and has increased consumer debt significantly.
Thirty years ago you would not have seen very many people with 2, 3, 4, or even 5 mortgages on their house. It just was not done.
Many Americans have willingly incurred more debt then they can afford to pay.
Mike Sylvester
Mark Souder takes the “big government” stance AGAIN
You should read today’s piece in the News Sentinel written by Bob Caylor. It discusses the views of all three candidates for Indiana’s 3rd Congressional District on the current bailout being considered by Congress.
On this blog several commenters have taken exception to the fact that I am voting for Libertarian William Larsen rather then “big Government” Republican Mark Souder this fall.
This article shows just one more reason why I cannot vote for Mark Souder for Congress.
I have posted a lot about the Socialist bailout of Wall Street on this blog and everyone reading this blog knows that I oppose it and why I oppose it.
Per the piece Libertarian Larsen opposes the bailout package.
Per the piece Democrat Montagano says “he would not support such a bailout unless benefits for more individuals are added.”
Per the piece Republican Mark Souder says “some type of bailout is necessary…”
Further he says that after consultations with experts from Bank of America and JP Morgan Chase that “Federal support is needed unless you want to lose every bank in your district.”
What a complete load of BS.
Mark Souder should go and consult with local banks in his district rather then large banks located in New York who are poised to gain the most from this bailout. Mark Souder should call some local financial planners, CPA’s, bankers, etc. I talked to two other CPA’s today and three certified financial planners today. All six of us oppose the bailout in Washington DC. We all live in Mark Souders District and we are all small business owners in Mark Souder’s Congressional District.
Rather then talk to us he chooses to talk to Bank of America and JP Morgan.
I will be voting for Libertarian Larsen for Congress.
This piece shows yet another reason why.
Mark Souder is a “big government” Republican that has no grasp of economics.
Mike Sylvester
How the current financial crisis occurred, part 3
The third item that contributed to the current financial crisis are rules put into place in the last decade, mainly due to the collapse of Enron.
Congress passed sweeping regulation known as Sarbanes-Oxley. This act passed in a bi-partisan fashion with unanimous support in the Senate in 2002. In the House of Representatives it passed easily with almost all Republicans voting in favor of it and about 60% of Democrats voting in favor of it.
Sarbanes-Oxley changed financial reporting requirements and required a tremendous amount of new and costly regulation to be put into place. This regulations cost companies billions of dollars to comply with and has completely failed to prevent the current financial crisis.
Consider this, Lehman Brothers just paid over 31 million in auditing Fees to Ernst and Young for 2007 and recently got a clean fiscal bill of heath; months before filing bankruptcy.
Another relatively recent change are the mark to market accounting rules and FASB 157. Since the 1980’s there has been a partial shift towards fair value accounting in the United States. In fact, the SEC now plans on taking all Publicly Traded companies entirely to fair market accounting in the next few years. These rules have been implemented over the last 20 years’ especially the last few years.
In mark to market accounting rather then carry items at historical cost you have to “mark them to market” or adjust them to their current fair market value. In a volatile market this has had a tremendous impact on the balance sheets of banks. Basically banks have been forced to take large write downs of their assets as they have realized that many of their loans have gone into foreclose and will not pay the lender back.
Accounting changes have significantly contributed to the current financial crisis.
Mike Sylvester
Kos over at Daily Kos “nails it”
This is not something that I say often; however, Kos has a post on his blog Daily Kos that sums up the Wall Street bailout package rather well.
In his piece he warns Democrats that they will enable Republicans to distance themselves from President Bush if the Republicans vote against this bailout package.
He then goes on to warn Democrats that if this corporate bailout package passes with Democratic votes that the entire unpopular bailout will be blamed on Democrats.
He is so right on this one.
Any intelligent human being in Congress should vote against this abysmal bailout.
I heard polling data today that claimed that only 28% of those polled favored a major bailout plan.
It is six weeks before the Election; both parties should be careful with this from a political standpoint!
Mike Sylvester
Another reason Senators make bad Presidents and Vice Preidential candidates
As you know I have been wavering between voting for McCain or Barr for President. I am still wavering somewhat; however, if I were voting today I am back to favoring Libertarian Bob Barr.
Both major Party political candidates for President are US Senators as is the Democratic Vice Presidential candidate.
Congress is debating what will likely be the largest bailout since the Great Depression, in fact they are considering a bill that could dwarf all previous bailouts.
That being said all three candidates are likely to skip the Senate vote on the bill in order to campaign for President and raise money.
There are only 100 Senators in the US. Three are too busy with the Presidential campaign to bother attending this Senate vote. In fact, the truth of the matter is they are all three too busy to be bothered with being involved in hardly any Senate votes…
What a sad state of affairs.
All three men should be completely ashamed of themselves and all three are failing in their duties as US Senators.
Mike Sylvester
How the current economic crisis occurred, part 2
The second item that significantly contributed to the current financial woes of many of the nations large investment banks is an excess of the use of debt and leverage.
In the last 25 years laws have been passed that allowed additional institutions to carry mortgage debt including insurance companies and investment banks. This has caused mortgages to be held by many more companies and industries. These laws also allowed companies that were not heavily regulated as far as their balance sheets are concerned (Investment banks etc) to accumulate a size-able amount of mortgage debt.
In the last 25 years laws have been passed that have caused the SEC to not have the amount of regulatory authority they used to have and use. The SEC has been minimized and has loosened its controls on the financial sector significantly.
In the last 25 years laws have been passed that allowed companies to have lower reserve ratios then used to be required. This basically allowed these companies to have insufficient capital on hand in case of an economic downturn (Such as the recent real estate downturn). Basically they borrowed more and more and took larger and larger risks in order to realize a higher profit; however, they were not ready for an economic downturn from a capital perspective.
Complex financial derivitives were intoduced that allowed companies to take even more risk and supposedly protect them against risk. One such derivative is a Credit Default Swap. These instruments are very complicated and even Warren Buffett admited publicly that he did not understand them.
Short selling became rampant when there was a panic on Wall Street and this in turn cuased the financial sector to drop further as speculators bet against the financial sector by short selling their stocks.
All of the above items contributed to the problem and all of the above items made the following true:
Companies leveraged their money fully, accumulated large amounts of debt, and created a financial situation for themselves where real estate prices had to continue to rise at historic rates to keep the companies making large profits.
Those of you who have read my blog posts over the last couple of years know that I continually harp on the fact that we have too much debt. The Federal Government is in way too much debt. Most States, cities, towns, municipalities, school districts, etc. are in debt. Most companies are in debt. Most taxpayers are in debt.
Well, too make a long story short, I was right. We do have too much debt and the effects of that are finally starting to be seen!
Mike Sylvester
The sorry state of Journalism in the United States
Our own Jeff Pruitt has taken the Fort Wayne Journal Gazette to task for not attributing items it takes directly from local blogs.
I would like to take ABC news to task for the editing it did on on the Charles Gibson interview of Sarah Palin.
I highly suggest you read this story!
Many mainstream media outlets might as well be paid campaign outlets for the Obama campaign.
Mike Sylvester
How bad is the Wall Street Crisis?
It is bad enough that in the middle of an evenly matched Presidential campaign Republicans and Democrats have for the most part decided to follow the advice of three Bush appointees and do anything those three want. Those appointees are in charge of the Federal Reserve, SEC, and Treasury Department.
Pelosi, Reid, and Obama are all stating that they have faith in these three Bush appointees and that they will help push their bailout measures through Congress quickly in a bi-partisan fashion.
Considering the fact the both Democrats and Republicans badly want to win the White House and considering the fact the the race is even; this bi-partisanship tells you that Congress is scared. They have joined the “herd.”
We are racing towards Socialism at a pace that frightens me and makes me fear for our Country.
Mike Sylvester
Joe Biden was the wrong choice, part two
I still feel that Joe Biden was the wrong choice for Vice President. He has spent some time in the news and some of this news has been positive and some negative, as is normally the case.
First of all I appreciate his honesty. He has consistently stated that he supports Barack Obamas tax plan which will cut taxes for most Americans; however, that he will raise taxes for Americans making above about $250,000 per year. Biden is being honest and I appreciate that. He is not hiding the fact that he feels it is appropriate to raise taxes on those making more then $250,000 per year.
Second of all he stumbled when he said “paying more in taxes is the patriotic thing to do for wealthier Americans.” The wealthy already pay significantly higher taxes then the rest of Americans. It is absurd to think it is ”patriotic” to pay higher taxes. I think it is “patriotic” to pay your fair share of taxes.
Third he revealed his tax returns for the last ten year. I once again appreciate his honesty and openess in releasing his tax returns; I repect that. Over the last ten years he and his wife have made an average of $250,000 per year. This puts them in the category of wealthy by any realistic definition of the term. He is easily in the top ten percent of wage earners in the country. That being said in that same period he donated an average of $369 per year to charitible causes per his tax returns.
Fourth and worst for Joe BIden is the fact that he has requested 330 million dollars of Congressional Earmarks for next fiscal year. Obama is running on a platform of change and his running mate is requesting one third of a billion dollars of earmarks for next fiscal year alone.
This is going to be a close Presidential race due to the massive mis-steps by the McCain campaign and the Obama campaign.
Mike Sylvester
