February 26, 2009

Now, They're Just Giving Money Away

Yesterday, I was browsing the news across the Intertubes and I ran across this article: "Bailed-out bank enjoys concerts, dinners, parties." Naturally, I was curious and potentially angry that a financial organization that the Feds had bailed out was throwing money around. I was not prepared for what I was about to read.

Six paragraphs in, I found this little gem:

(Senior VP) Holt told CNN that as a "healthy" bank, Northern Trust did not seek the $1.6 billion it received from the government as part of the U.S. Treasury's Capital Purchase Program, but that it "agreed to the government's goal of gaining the participation of all major banks in the United States."

What the!?  Huh!?  They weren't in trouble but the Feds leaned on them to take the money anyway?  What kind of operation are we running here?

Between the bank bailout and the spendulus, the Feds have dumped a load of debt on future generations.  It's bad enough when they tell us it is necessary, but now we are discovering that most of it was unnecessary.  I have a feeling that the villagers will be getting their pitchforks and torches and storming the castle soon.

Posted by: Steve L. at 06:19 AM | No Comments | Add Comment
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February 25, 2009

An Alternate Plan for the Housing Industry

I’ve spent some time thinking about the money being thrown around at this crisis and that crisis.  The crisis du jour is, of course, the housing crisis.  The Obama administration wants to give money to help people pay their mortgages.  While it’s not clear exactly how this plan will work, I’m sure it will be an abject failure.  So far, that’s what all the other plans seem to be.  I have an alternate plan that I think will accomplish the goals stated by the administration and reduce the risk for the banks.

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Instead of handing out money to banks or mortgagees, I propose the government provide tax credits to lenders who refinance mortgages so that they are more affordable.  The credit would take the form of a percentage of the total refinanced value.  However, the lender could only take the credit if the mortgage was current after one year.  This would do two things:

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1.  The lenders would have the incentive to refinance the loans to more affordable terms.  Since they have to wait one year to get the credit, they will want to make sure the mortgagee can pay.

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2.  The lenders won’t try to refinance risky loans.  They won’t want to risk their money not knowing if the loan would be current at the point of the tax credit.  This will do much to improve the health of the lending industry.

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I can foresee this being extended into new mortgages as well.  The benchmark for receiving the credit might be further down the road just to make sure that the loans are good ones.  This could have the added effect of encouraging lenders to make a few loans that, on the surface, might seem risky.  It might entice them to work out the terms in a way that is beneficial for both the parties.

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A final provision would be that, at selected benchmarks, the lender could take other credits.  Again, this would encourage lenders to write loans that are affordable for the customer.  In fact, the program could be structured so that lenders could ultimately recover a large percentage of any given loan through the tax credits.

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This plan isn’t perfect, but I would rather see this type of attempt to revive the industry rather than just throwing wads of money at it.

Posted by: Steve L. at 01:21 PM | No Comments | Add Comment
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February 10, 2009

And This is the Guy?

As we all know, Arne Duncan is the current Secretary of Education. HIs bio notes:

Prior to his appointment as secretary of education, Duncan served as the chief executive officer of the Chicago Public Schools, a position to which he was appointed by Mayor Richard M. Daley, from June 2001 through December 2008, becoming the longest-serving big-city education superintendent in the country.

 This is interesting in light of of "'Painful Lessons': Abuse At Chicago Schools."  The article reports that since 2003, 818 students in Chicago have reported that they were physically abused by a school employee.  An investigation by the school district confirmed that at least 568 of the allegations were true.  Additionally, the rport discovered that the vast majority of the attackers only received a slap on the wrist.

Of course, Duncan, when questioned by the TV station on the abuse, said that anyone caught abusing a student would be fired.  However, history doesn't seem to uphold that.

Is this the guy we really want running our schools?

Posted by: Steve L. at 10:50 AM | No Comments | Add Comment
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