In the 70's, I studied at Wichita State and Kansas University. My study was Business as I tried to get a degree in Business without taking that dreaded Foreign Language. I finally settled on a BS in Business. The additional science credits avoided the foreign language. It did push me into calculus but I managed to scrape by with a D and pass was all that was required.
As I studied, I took finance classes, accounting classes and a couple of Tax Courses that did little to prepare me for the events happening out in the real world. In those days, banking and finance were two different worlds and kind of like the mythical Church and State separation they were not to cross breed or self pollinate. In fact since the depression they were directed to split with Banking to be a bit stuffy and Finance to be a little volatile or risky. (Glass-Segal Act of 1933)
As we entered the realm of Ronald Regan, there was a move to let deregulation take hold and some of the stuffy rules to be eased. The good news is that there was still a separation of the Congress and the Presidency that kept the pace steady in change but not one of absolute craziness.
Once the message of Ronald Regan began to hit home, we entered a period of asking why does the system control all the guidelines that work so hard to limit and restrict. Why should City Group not be allowed to make loans and then to capitalize the loans as investments? Beats the heck out of me, but it did fly in the face of what I learned in Business School. In 1999 the Congress and the President Bill Clinton asked those questions and in a lot of ways, the rules got thrown out with the bathwater. (Gramm-Leach-Bliley Act 1999)
The age old tradition of citizens buying a home and that being the major investment in their portfolio changed to one of speculation in the whole market. I think it reflected the change in employment where people no longer worked for one company in one location their entire career. People began to move from home to home and job to job to move up rather than the age old move up in one system. Then somehow the profit in selling a home got untaxed and the whole system began to change.
Banks saw that they could capitalize the loans, they began to focus on growth through selling shares of an investment organization rather than protecting the loans on houses. Billions were made in the trading of the loans and transferring the loans to the Federal (Fannie May) system rather than managing the loans. It was almost like everyone closed their eyes to the excesses and if you could make more money by owning a home who cared? Simply put, people in California could buy a house, live in it for a couple of years and sell it for about a 10% a year gain. It did not matter how much money you could pay on the principle of the base loan, the gain would make everyone well. It was a Ponzi scheme so big that no one would or could shout stop for fear they would be left holding the bag. I cannot imagine a home in Topeka with no yard or place to park selling for $400,000. That is less than the average price for a home in Washington, D.C.
In my humble opinion, the limit of the amount of money that could be invested was reached and as the housing market began to slow, the payment of the mortgage began to be more important than what you could make on the sale of the home. Foreclosures have flooded the market and losses have the market swimming in red. The government owned the paper on more real estate than the market could bare. Those people that have been making money on selling and the capitalization of the housing market began to realize that the soft market has exposed the weakness of the whole mess.
The 8 years of Bush 43 did nothing to help clear up the mess and now that Barry has inherited the mess, everyone wants to know what are we going to do now. Massive debt has been placed on the shoulders of the taxpayers and the system shored up. If that was all the congress did for a couple of years we would all be well served.
What are they doing? As if they didn't understand the enormity of the situation, we have Government taking over the Auto Industry. Next they are proposing Cap and Trade (the giant Ponzi Scheme to give Congress all the money they want) and want to Federalize the Health Care system.
Cap and Trade will raise your utility rates by over $100 a month next year. If it cured the CO2 problem it would be a good thing. The truth is congress will not spend any of the money for bettering the environment. It will sweeten the pot of money the congress will have to spend next year. It will help rob the economy of needed capital and the slow down will further hurt the economy.
If you love the Medicare system and Social Security, you should love Federalized Health Care. I for one don't think the idea of expanding the idea of free Medical Care is a good idea. The States have faced the health care issue for years thanks to congress. I would encourage you to talk to your State Legislator to see if they think the system works.
Yes, I did move from how did we get here to where I fear we are going. You try to write it down any better. I'll be glad to read your side of this. I read that the Devil is in the details. The devil of this deal is that less than half of the people out there are paying attention. I'm not sure that half of them even begin to understand how important this issue is. Just when I think our Government should be in a hide and watch mode, they feel they need to try to right more wrongs with money they don't have.
MUD
No comments:
Post a Comment