Why Johnny Q. Public can’t pay his mortgage but can bail out Wall Street

Our system is broke. It’s now as morally bankrupt as Wall Street. The American dream is now a complete and utter farce and the belief that the people we elect actually “represent” us should be forgotten as fast as they forgot us with this “bailout”.

Johnny can’t pay his mortgage for a whole bunch of reasons- and not a single one of them is caused by mortgage backed securities or credit default swaps. Let’s take a look:

  1. The price of gasoline has doubled. Congress refused to raise fuel efficiency standards for years, and actually gave tax breaks for buying Hummers and Escalades. Oil companies have seen the largest quarterly profits known to man.
  2. The price of food has increased thanks to the lame idea that Corn makes gasoline efficiently. Corn makes pigs, cows and chickens fat efficiently- and high corn prices don’t even make corn growers fat, since they still have to buy diesel and fertilizer based on… well, see number 1 above.
  3. The price of health care has skyrocketed. Insurance which is supposed to spread the risk over large populations has instead been able to cherry pick and profiteer at will. CEOs of health insurance companies have taken home $100 million annual paychecks without so much as a blink.
  4. Real wages have declined in this country thanks to unfair trade policy and corporations being rewarded for cutting cost by off shoring labor. America, land of opportunity is now a service economy- does anyone want fries with that?
  5. Stock prices have been volatile, causing huge losses in pension funds and retirement accounts because of a complete disconnect between corporate performance and stock value. Wall Street has become a casino for banks, investment banks and insurance companies with programmed trading and massive transactional volume that has more to do with the market than the stocks of the companies that it is supposed to provide capital to.
  6. Changes in the bankruptcy laws were passed at the behest of the credit card companies (the banking industry that is now asking to be bailed out of bankruptcy). The free wheeling banks were allowed at will to jack credit card rates up to as much as 29% for a late payment, or an over the limit charge, and then when people couldn’t pay the credit card bill, the next thing that hit was the mortgage….
  7. Lastly, bankers were allowed to issue loans that made no sense- no money down, for 120% of value, balloon rates, no interest for a set time- and take fees right off the top- before a single payment was made. This is what we blame for the current mess- but it is just a small part of the puzzle.

The one thing that ties everyone of the things above together- all were enabled, ignored or caused by Congress- who has been either asleep at the wheel- or standing with their hands out to ask for campaign money from the people who have made money hand-over-fist from all of the above issues, and now are waiting for a handout from…. drum roll…. John Q. Public.

The “bailout” as proposed by these very same Congressional puppets of the uber “rich” Wall Street types who are now crying for help- does a very good job at protecting the walls of Wall Street’s house, but nothing to protect yours. No controls at all, other than stopping the captains from abandoning a very rich ship with an extra bag of loot (watch salaries rise to the people who are supposed to right the listing ships- so they don’t need a parachute because they’ve built a huge cushion to bail onto).

Let’s look at what should have happened:

  • Criminal prosecution and collection efforts of back bonuses and pay packages from all firms who have now failed or asked for corporate welfare payments. You dont’ get rich going broke in America under a sane system.
  • Caps on credit card rates of 19% for all banks that have had to borrow from the fed discount window (all of them).
  • Immediate investigations into oil company profits and oil speculation. It’s time to get serious about cutting consumption through ending government sponsored sprawl, raising fuel efficiency standards and considering out of the box ideas like a walk-to-work tax credit.
  • Treat any purchase of more than $50,000 in stock in any company that is held less than a year as a loan, with maximum return of no more than the prime rate as set by the Fed.
  • End Ethanol from corn- and allow it from kudzu or hemp or waste from sugar cane processing.
  • Put in place some sort of pay caps in the insurance industry connected to coverage of the US population. For example, until 90% of the population is covered, no executives in the health insurance industry or health care provider can be paid more than the President of the United States if accepting medicaid, government funds or given tax breaks as a non-profit – without suffering huge tax penalties. It’s time doctors, health care administrators and insurers came up with a solution or face a government intervention with a “socialized” health policy. We just “found” $700 billion to bail out banks, I’m sure we can find $700 billion to provide a higher level of health care to all than the current system.
  • Devise a formula for executive compensation that caps pay if US employment drops, payroll drops, benefits are cut or for being sold to foreign nationals. When we can’t even own our own major beer brewers, we’ve got a real problem.
  • Set formulas for a “standardized” loan reformulation. If your mortgage was non-standard, the bank can either buy the home back from you at FULL VALUE of the loan, or agree to a repayment schedule on a conventional loan set at low government interest rate for a longer period of time. This would only apply to banks that have had to ask for public money to survive. There will be a foreclosure penalty on banks, based on their reckless lending. If John Q. Public has to buy the banks bad paper, the banks should have to eat some of John Q.’s bad debt.
  • And last but not least- we need real campaign finance reform. If we can afford $700 billion to bail out Wall Street, it should be the least of our worries to take all the elections and fund them by an “ad tax”- with a percentage of all advertising dollars going to fund a public ad campaign for politicians with equal time and equal access to the voters.

The only problem here- is the voters have to be smart enough to understand when they are being lied to- like right now, when this bailout is being shoved through to their wallets without a single real concession to them. John Q. can’t pay his mortgage because he forgot to pay his congressman off.

That’s the real reason Johnny can’t pay his mortgage.

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48 Responses

  1. Drexel Dave September 29, 2008 / 12:23 pm
    James Howard Kunstler has been right all along:

    “The Ponzi-Plus Plan

    To paraphrase the late and great old war-horse of the senate, Everett Dirkson of Illinois (1896 – 1969), a trillion here, a trillion there, sooner or later you’re talking about real money. Except in the case of the Great Bail-out of 2008, maybe it’s more like… sooner or later your money is no longer real.

    What we’re seeing in this fiasco, among other things, is a lesson in the diminishing returns of technology. This is a train wreck of investment vehicles so complex that they could only be created with the aid of computers. The result is that hardly anyone — perhaps even nobody in or out of Wall Street — really understands what they represent. In fact, this alphabet soup of engineered securities — CDOs, CDSs, MBSs, SIVs, etc — was cooked up from a recipe of Ponzi algorithms. They were designed to be mathematically indecipherable, except by computers, in an alternative universe of model-making that bore only a superficial relation to the real world. That was their dirty secret. And the dirty secret of the Great Bail-out is that, in the real world, we will never be able to discover the actual trading value of these things at any number above zero. This is why they are called “toxic.”

    http://jameshowardkunstler.typepad.com/

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  2. Greg Hunter September 29, 2008 / 2:28 pm
    One thing you can count on in this town is that absolutely no one will admit they made a mistake, especially when people like us have been pointing out the errors of their ways for years. The chickens are coming home to roost, unfortunately, we all go down together.

    I would also eliminate the tax deduction for home ownership as well as child ownership. It just encourages production of two things we do not need – houses and people. Another idea would be to limit development until a specified density was reached…. ER sorry that was socialism, unlike the providing Taxpayer money to Goldman Sachs – Free Markets my eye – Death to Larry Kudlow.

    This crisis will cover up the fact that we (World) was hitting “peak oil” production, which will allow people to think “It will get better” – Long Emergency is Right!

    The 700 billion should be put to work building electrified rail and retraining realtors, mortgage bankers and stock brokers on driving railroad spikes. Where is FDR when you need him?

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  3. Drexel Dave September 29, 2008 / 2:43 pm
    The suburbs fall first.

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  4. JB September 29, 2008 / 3:56 pm
    “Where is FDR when you need him?”

    We don’t need FDR – we need Andrew Jackson ! Nothing, I repeat NOTHING will change until the Federal Reserve is nationalized, the board fired and replaced with statesmen that are accountable to the people rather then a banking cartel, and fractional reserve banking rules abolished. Everything else is just band-aids.

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  5. TeresaLea September 29, 2008 / 5:08 pm
    Greg –

    Child ownership? Come on now…

    No offense, but you find me a mother who went through child birth to get a tax credit and I’ll let my ex claim ours on next years tax return. (Neither will ever happen)

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  6. greg hunter September 29, 2008 / 9:33 pm
    Errr… No offense, but a deduction for each child does not make sense. Please explain why this “investment” bears fruit for society? In a resource constrained environment, I see no benefit in more consumers. Does not compute?

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  7. David Esrati September 29, 2008 / 10:20 pm

    Greg-
    We need more young people in this planet to support the old ones. Besides, until you stop the Chinese and the Indians and the third world from breeding like crazy- it won’t matter anyway.

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  8. Larkin September 29, 2008 / 10:47 pm
    “until you stop the Chinese and the Indians and the third world from breeding like crazy”

    I was going to say how wrongheaded this statement is, but I am just too tired. Which doesn’t make it any less wrongheaded.

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  9. greg hunter September 29, 2008 / 10:51 pm
    1 American child consumes as much as 9 bangaladeshi children. Do the
    Math! iPhone post, no links. Bs about parents, no hospice, no nursing homes, 3 generations in 1 house.

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  10. David Esrati September 29, 2008 / 10:56 pm

    Mike Turner voted no on the house bailout bill. Good for him. Now, the question is- what’s his solution?
    http://clerk.house.gov/evs/2008/roll674.xml

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  11. Gene September 29, 2008 / 11:13 pm
    > the suburbs fall first.

    ? what? I hope you understand that it is those who live in the city limits that work for those in the suburbs, true Daytonians shall be hit and hit hardest.

    This ship is sinking. Good luck to all. Please do not steal from my house. I will sell everything I own within the next month – after that no one will have any money to buy anything.

    This is the end………..

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  12. TeresaLea September 29, 2008 / 11:47 pm
    “Errr… No offense, but a deduction for each child does not make sense. Please explain why this “investment” bears fruit for society?”

    I’d be happy to.

    Firstly, the EITC is given to people without children too. EITC stands for Earned Income Tax Credit. If you make under 12k a year, you are eligible for relief of your tax burden. If you make under 33k with one child, you are eligible and so on and so forth.

    FYI: Earned Income = working people

    The US is not the only country that participates in such a tax relief program. In 1975 our government decided we probably shouldn’t have such a high poverty rate in this country and enacted this credit.

    Economists have estimated that for every $1 people receive in tax credit, $1.50 is put back into the local economy. This creates jobs and MORE TAXES!! It also helps keep working people above the poverty level.

    Just FYI: Poverty = bad. Look, I computed!

    Now, there is ANOTHER tax credit available to people WITH children. It is a WHOPPING 1k per year that most families never even see, because if a married couple makes over 110k they are not eligible for this credit.

    Unfortunately, we live in an economy where it is hard for only one parent to work and still be able to raise a family. My parents first home cost $13k – My first car cost 13k, and it was used.

    These families who are working (and paying taxes) have to have childcare while they are at work, to earn an income, to pay taxes. So, in order to keep this tax revenue flowing and help keep families out of poverty, the government gives this tax credit to families who might find it a bit more difficult to afford $150 per week childcare (per child).

    In no way are either of these an incentive to have a child. Whether or not these tax credits are good or bad is irrelevant – the point is that no sane person would have a child just to receive a minimal tax credit.

    Now – why don’t we get back to the original discussion of why our economy is in the tubes and quit blaming it on people who pay their taxes and are able to reproduce.

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  13. J.R. Locke September 30, 2008 / 7:21 am
    “most families never even see, because if a married couple makes over 110k they are not eligible for this credit” – TeresaLea

    Are you implying that most families make over $110,000 a year?

    ———
    But I agree no one has children for a tax credit, just for welfare. Oh I remember the 90’s, good times the welfare hysteria.

    Interesting vote on the bailout. Both Dems and Rubs holding out. Very interesting indeed.

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  14. John Ise September 30, 2008 / 7:39 am
    We can rail about the problem, or we can fix it (these are good ideas floated however). Congress’ actions, particularly Republicans, show that it’s politics first, national interest second. Steve Pearlstein of the Washtington Post puts it:

    “The basic problem here is that too many people don’t understand the seriousness of the situation.

    Americans fail to understand that they are facing the real prospect of a decade of little or no economic growth because of the bursting of a credit bubble that they helped create and that now threatens to bring down the global financial system.”

    Think of the bailout as sticking a finger down the throat when poison is ingested. You gag on it, but the gagging is saving your life.

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  15. TeresaLea September 30, 2008 / 8:47 am
    “But I agree no one has children for a tax credit, just for welfare.”

    And all white men have small penises.

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  16. In the 'burg September 30, 2008 / 10:17 am
    So what can you do with 700 billion, anyway?
    Well, you could buy 2.8 million houses for 250K.
    You could buy 7 million houses for 100K.
    You could pay for 17.5 million four-year degrees.
    You could put 70K into every single mom’s bank account.
    You could give a million dollar research grant to 700,000 scientists.
    You could send a check for $6,300 to every household in the country.
    You could buy about 500 B2 bombers
    Or you could temporarily prop up a greedy, broken system that’s going down in flames anyway.

    I don’t think we need to begrudge anyone a lousy 1,000 tax credit.

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  17. greg hunter September 30, 2008 / 10:21 am

    These families who are working (and paying taxes) have to have childcare while they are at work, to earn an income, to pay taxes. So, in order to keep this tax revenue flowing and help keep families out of poverty, the government gives this tax credit to families who might find it a bit more difficult to afford $150 per week childcare (per child).

    In no way are either of these an incentive to have a child. Whether or not these tax credits are good or bad is irrelevant – the point is that no sane person would have a child just to receive a minimal tax credit.

    I do not see where this “credit” benefits society, while I contend that society does benefit from a two parent home….it takes a village and all that….so I have no problem with the Marriage Benefit, provided this benefit accrues to everyone who wants too develop a two person household, so get Married get a big credit, but I do not give a dime more of tax credit for each beater pumped out beautiful, possibly the next Jesus, Ghandi
    or Einstein blessed to join this world.

    Now – why don’t we get back to the original discussion of why our economy is in the tubes.

    Greed in people and then a lack of oversight by the “wonderful people” we elected. So if you want to know why we are in this problem, is that we elect Cheerleaders instead of people that can see the potential storm clouds and attempt to lessen the impact of
    these crisis. However, because we live in a “blessed country” a “bright shining country on the hill” Americans tend to think all of their decisions are correct and if not “what the heck, try again”. My contention is that America cannot afford the lack of foresight we had over the last 15 years.

    If you want an analysis of the future of what happens next on each level, I can certainly provide it, but once we discuss the idiocy of the investments that were made by the public sector, which the decline in revenues will not be able to cover (pay), then the bickering over what to cut (fire, recreation, roads at the local level) (military, parks, security at the national level) will ensue. Then we can discuss what should be done to stem these issues. Now I can discuss what should be done to maintain the basic necessities while we strive through the process, but this process of “educating the public” on the true problems facing society will take too long and then another 10 years will be wasted and the “problems” will be greater in magnitude. So based on my own analysis, unless we skip the 10 year educational process, America is screwed, and rightfully so, as the Greediest Generation spent money on the “greatest misallocation of resources
    in the history of the world”. Now the world is voting on America’s economic model and the “we hold these truths to be self evident” about the model.

    Just as a laugh I went back to look at my “speeches/proposals” made by me during my unsuccessful run for Congress in 2002 (too bad for the Community) and here is a quote from one

    This plan would divert money originally earmarked for New York Stock Exchange Companies to be invested in the community where it could spur the most innovative and America’s largest employer, the Small Business.
    Please look at the plans the current Congress is recommending, all of them involve allowing you to send more Money to New York, so they can waste it.
    Let’s use market forces to make New York manage your money better, and at the same time spur investment in the local community.

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  18. TeresaLea September 30, 2008 / 11:11 am
    Just where you don’t see the benefit, I don’t see the detriment. The CTC and EITC aren’t really relevant to the discussion.

    Some of your other points are valid.

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  19. TeresaLea September 30, 2008 / 11:35 am
    “You could pay for 17.5 million four-year degrees.BINGO
    You could put 70K into every single mom’s bank account.”

    Although the first might be the more economically sound idea, since these educated citizens would be able to give back to the economy by working and/or creating jobs…

    I still think the 2nd is a better option – I mean do you know how many pairs of AWESOME shoes I could buy with that kind of dough?? That alone could change the world.

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  20. JB September 30, 2008 / 11:56 am
    TeresaLeasaid:

    “Unfortunately, we live in an economy where it is hard for only one parent to work and still be able to raise a family.”
    ————————————————–

    People see rising prices as “the” problem and so politicians devise a never ending stream of band aid “fixes” to the tax code or government programs to “make education or health care “affordable” and to “keep people in their homes” – but rising prices are only the symptom of the real problem which is the banking system and monetary policy dictated by the Federal Reserve which debases the value of our money.

    Every time one of these “bailouts” are implemented the value of the existing money supply is reduced through inflation which causes the cost of everything (especially food and energy) to rise and the value of your savings to decline (looked at your 401k lately?). The current rate of funny money being created to solve these (self-inflicted) crises has gone parabolic and will bring about the complete collapse of the dollar if this insanity is not stopped.

    The “Experts”

    “Economists” don’t have the answer. Their math models leave out the “human” factor of economics which involves ethics and morals in a world tainted by original sin. Their “scientific” models have no “e” variable for entrepreneurial virtues of courage and perseverance, and thus are the best documented case of failure ever devised.

    “Politicians” are even more clueless. Most see their “success” as going to Washington to “bring home the bacon” in the form of as many federal dollars as they can to their district – not understanding that every dollar they bring back to “create jobs” is BORROWED AT INTEREST. It’s like putting your mortgage payment on a credit card and saying See! I’m current on my mortgage! All they are doing is delaying – and worsening the problem. The end result is all of us working harder and harder for less and less as taxes have to rise to pay an ever increasing government debt.

    “Constituents” get all wrapped around the axle with partisan politics and the mud slinging that goes with it – meanwhile the bankers are (literally) laughing all the way to the bank while the heat that should be aimed at them is deflected to their “Republican” and “Democrat” stooges in Washington.

    “Bankers” are robbing us all blind through fractional reserve lending rules which permits them to literally create money out of thin air and lend it to you, me, and the government at interest. It’s like Tom Sawyer getting the town’s kids to paint his fence and paying him for the privilege!

    It’s the “Stupid Economy”

    According to the American Heritage Dictionary, the word economy can be traced back to the Greek word oikonomos, “one who manages a household,” derived from oikos, “house,” and nemein, “to manage.”

    A “nation’s economy” begins at the family kitchen table – not on Wall Street. Until all monetary and tax policy is aimed at fixing problems at that level instead of GDP and stock prices, we will only continue to exacerbate our problems, and the best “solution” they can offer is getting off the backs of families through access to debt-free capital, and tax law that is friendly to family business.

    This country operated in great prosperity without a central bank for 86 years. ALL of our current financial problems can be traced back to 1913 when the banking cartel called Federal Reserve (which is not “Federal” and has no “reserves”) was created and given the authority to issue money and determine its value (which by the way is the responsibility of Congress under the constitution).

    Until the government issues its own DEBT FREE currency, our economy will continue on the never ending cycle of boom-bust with ever increasing prices. The Federal Reserve is a legalized Ponzi scheme which is in the process of collapsing (as it must). Washington may kick the can further down the road with (yet another) bailout, but they are so focused on the current position of the can that they fail to see that they are headed toward a cliff with a pit that leads to (Communist) China.

    It’s time for people to stop looking to the government for answers. As Ronald Reagan stated so eloquently, “government doesn’t have the solution to our problems – government IS the problem”. While he correctly identified the problem unfortunately his administration greatly contributed to it through massive deficit spending of borrowed money from the Fed.

    The first step is to educate yourself on what is REALLY going on so you can make informed decisions, for neither the problems nor the answers is “Republican” or Democrat”.

    This animated film called “Money as Debt” (47 min) explains the root problem of fractional reserve banking and proposes (some) sound solutions.

    http://video.google.com/videoplay?docid=-9050474362583451279

    If you want a “graduate course” in monetary reform – I highly suggest this 3 hr documentary called “The Money Masters”. You will never look at banks the same way again.

    http://video.google.com/videoplay?docid=-515319560256183936

    Then go to their web site and read how real monetary reform can fix these problems. It will take Democrats, Republicans, Libertarians, Constitutionalists and every other flavor to fix them.

    http://www.themoneymasters.com

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  21. In the 'burg September 30, 2008 / 12:36 pm
    Wonders never cease.
    Turner voted with Kucinich, and TeresaLea agreed with In the ‘burg.

    ;-)

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  22. Tom Eberhard September 30, 2008 / 2:00 pm
    How ’bout letting the banks repossess the houses? After all, that’s what the point of a mortgage is. Then the banks can let the previous owners pay rent. The banks get cashflow, keep the house off the market, and the people have a place to live.
    So the banks don’t want to own and manage houses. That’s what property managment companies are for.

    I don’t agree with the idea of capping my returns on stock purchases held for less than a year.

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  23. Allison September 30, 2008 / 2:14 pm
    It’s kind of pointless to give people tax credits for having kids, under the premise that they will grow up to pay taxes to support us old people, if those kids grow up to earn minimum wage and in turn collect the EITC. I, personally, am tired of subsidizing under-performers, whether they be corporations or people.

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  24. David Esrati September 30, 2008 / 4:06 pm

    @Tom-
    I doubt you would be purchasing more than $50,000 in one stock at a time- if you are a small investor. If we had to bump it up to $100K- so be it- but the idea is to stop stock manipulation by large traders.

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  25. Jeff September 30, 2008 / 9:29 pm
    Tom Eberhardt brings it back to whats happening on the ground, on the fate of foreclosed properties, the tangibles behind the “toxic assetts”.

    And a very good question on the fate of the foreclosed homeowners…presumably they move into the rental market, and can the rental market absorb this?

    What happens to foreclosed houses? Drexel Dave is wrong in his post that “the suburbs fall first”. Maybe in the sunbelt, where theres been overbuilding, but here in Dayton its the city thats going to fall first, as thats where the foreclosures are. And no one wants to buy in Dayton because, lets face it, outside the historic districts and a few outer neighborhoods, it’s a big ghetto.

    So the end result could be the coup de grace for the city, or substantial swaths of it. Or the foreclosed propertys could be snapped up by investors wanting to make a killing on rentals, let the properties deteriorate as the defer maintenance while milking them for rent, and the city turns into a bigger slum than it already is.

    yay Dayton.

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  26. Drexel Dave September 30, 2008 / 11:30 pm
    The suburbs fall first because

    1. The cities have already fallen

    and

    2. Suburbs are economically unsustainable long-term, not to mention the greatest mis-allocation of resources in the history of the world.

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  27. Alan Stanwyck October 1, 2008 / 9:27 am
    To: David Esrati

    You portray wealth envy at its finest and the standard democrat playbook to a tee. I read your article… and its obvious you have no knowledge of or any education on economics.

    Point #1 – Yes, the price of gas has doubled, but it has nothing to do with Congress refusing to raise efficiency standards. Why is it the responsibility of Government to force private companies to improve efficiency? If the market wants efficiency, suppliers will produce it. But suppliers will only produce it if the cost of efficency is below the cost of just another car. Why are hybrids over $25K today when you can buy other new brands for the mid teens right now? If option #1 is getting a Hybrid for $25K and option #2 is a ford pickup for $15K, the customer has to determine if saving $10K is a greater beenfit than the savings on future gas & maintenance expenses.

    Gas prices have risen due to the value of the dollar and basic supply and demand. When you inject more money (currency) into circulation, the value of that currency declines. We call this monetary policy if you were sick the day they taught that in your government school. Since over 60% of the oil used in the U.S. comes from Canada, Mexico, Saudi Arabia, and Venezuala, the value of the U.S currency matters to these producers. So they raise the price to make sure what they are receiving has appropriate buying power. And the U.S has not built a single new oil refinery since 1976. How many cars have been built since 1976? When demand outweighs supply, the mitigating factor is the use of price to bring equilibrium back into balance. And throw on that China and India now have increased their auto usage 10 fold. More demand….same supply….higher prices. By the way,in 2007, Exxon/Mobile paid $30 BILLION in taxes to the federal government and only had a profit of $40 BILLION. You don’t hear that part in the media. That’s a 42% tax rate! They almost paid as much in taxes as they earned. But I guess they are not paying their fair share! I guess they need to be more “neighborly”.

    Also, please tell me where you are getting your data on getting a tax break for buying a Hummer or Escalade. As a CPA, I must have missed that deduction for all my clients. This statement is so asanine. And lastly, oil companies do make large absolute profits, but do you have any clue on what a profit margin is? The oil industry’s profit margins are actually declining (9%-11%)and rank somewhere in the middle of the largest 500 companies. With your logic, its okay to make a profit, just as long as it is not a big number. You have to relate what the profit was to how much was sold. If McDonalds makes 1 cent profit on every burger it sells, thats okay according to you. But if it sells a couple billion burgers, that’s an excessive profit! Profit is a function of quantity too!

    Point # 3 – The price of healthcare is increasing because of supply or the lack of it. Do you want to go to med school for 6 years and take on roughly $100K in school loans and be told by the government what your skill is worth? I doubt it. Insurance companies do not “cherry pick” their risks. Insurance companies take on health care risks based on # of employees, age, sex, and past aggregate claims. This is called a census and the only underwriting info insurance companies take into account when determining rates for a particular client. They have no idea of knowing who is in poor health or good health. Please give me the name of just 1 CEO in the health insurance industry that took home $100 million in an annual paycheck.
    Point #7 – Why would any bank give a loan out to someone with poor credit or for an amount greater than the asset? It is becasue the bank has a back up plan or plan B if things don’t work out. That back up plan is Freddie Mac and Fannie Mae. Freddie and Fannie were specifically created by the government to back loans. The loans that should never have been given out in the first place, are bought up by Freddie and Fannie, and then sold again in budles called Mortgage backed securitites. So, an industry who use to retain the risk of lending was altered by government intervention….and the loss of the free market checks and balances then ensued. Please see wikipedia: “Community Reinvestment Act” and you will se what I am talking about where government intervened in teh free markets. (I chose wikipedia since it is basic unbiased information)

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  28. David Esrati October 1, 2008 / 9:49 am

    @Alan,
    Glad you’re reading. However- I have at least a rudimentary education in Econ. as part of my BSB in Marketing.
    This country has done nothing to reduce consumption of oil, a limited resource. No incentives for public transit, walkable communities or more efficient vehicles.
    Considering countries that we don’t really get along with have large quantities of oil- I call this questionable policy.
    Congress did in fact provide a tax break for vehicles over 8000lbs- of which only the Escalade, Navigator and Hummer qualify, allowing half the value to be depreciated in the first year: http://moneycentral.msn.com/content/Taxes/P97282.asp
    Now, what kind of CPA are you?
    3) We are the only industrialized country not to provide universal health care. Our costs run 6x what they do in other countries and cover less people. Very little money is spent on preventative medicine. And if you think $100K in loans gets a medical degree these days, you’re smoking something.
    7) Banks- why they did what they did? Because they could, when congress deregulated banking. Note, if they didn’t do it- we supposedly wouldn’t be in the situation we’re in now.
    Wealth envy my ass- our country is now in debt up to our asses-
    I’m sure all those taxes you claim Exxon paid really helped.
    As did the biggest government in history- all thanks to your elected “conservatives.”

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  29. Alan Stanwyck October 1, 2008 / 9:55 am
    To All:

    Everyone seems to be praising FDR? You people do know that FDR’s “New Deal” is the basis for increased federal spending? He created Social Security, unemployment insurance, FDIC, the SEC, FTC, farm subsidies, and ceased all gold from the citizens of the U.S. I see a lot of people complaining about the bailout… but the bailout is exactly what FDR stood for….more government spending to help the economy.

    NOTE: Social Security is not insurance. Insurance is used to transfer risk and is triggered by a specific event casued a cause of loss. Social Security is a guarantee of income which is also called an entittlement program. Social Security currently consumes 20% of the federal budget (single largest expense) and is the largest social program in the world.

    Also, since the great depression caused unemployment to rise to almost 25%, the government lost tax revenues from all these people not working. So what did FDR do? He raised taxes and tariffs…cause the government was spending more money. When you want companies to hire people, you do not increase their expenses and make it harder to make a profit. Now, this tax increase is not the cause of the great depression, but the main reason why it went on for over 8 years. Isn’t there a presidential candidate today that want’s to raise taxes? Could we be repeating history?

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  30. Gene October 1, 2008 / 10:13 am
    Is Alan Stanwyck your real name or did you get it of the movie “Fletch?” John Winger and Ty Webb want to know your business.

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  31. Greg Hunter October 1, 2008 / 11:17 am
    Geez, I do not know where to start with big Al Stanwyck as he is so out of touch with reality he must be an elected official.

    Mr. Stanwyck, FDR bailed out the working man, not the greedy, pencil pushing, money manipulators like….aaahh CPAs! You write like an acolyte of the worst “science” ever devised – Economics. Let Wall Street Fall and then ship the money manipulators to build Nuclear Plants, electrified rail and wind farms in areas that actually produce something of value, like good food from Mid Western Farms. Why not stroll over too the Wikipedia site for the Civilian Conservation Corps and see who FDR bailed out and what was accomplished. Many of these structures and “investments” are in place today as I have reviewed many of these structures and these are some of the best built “investments” I ever seen.

    Alan – I will not discuss oil with you as you are not worthy, but the growth economy of America is based on cheap oil. You are correct that supply cannot match demand, but despite economists assurances, there is no viable replacement for this cheap energy source, so get used to not having a car. If we were smart we would plan for the future instead this “free market” solutions.

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  32. Alan Stanwyck October 1, 2008 / 1:52 pm
    David Esrati,

    I read the article you posted and I am aware of the deduction rules. You are confusing the use of vehicle in a personal manner versus one used in a busines. Merely buying a Hummer or Escalade does not entitle you to a tax break or deduction. You must use that vehicle “solely” in the operation of a business. This means you must be a business owner or business entity and the amount of deduction is only limited to the amount it is used in a business operation. Personal use is not allowed to be deducted. Now, there is a difference between an expense and a cost. All business expenses are allowed to be deducted. But business costs must be deducted through time…called depreciation. It makes no difference if the vehicle is a Hummer or a Prius. Their value is duducted through a depreciation schedule. Otherwise, a business could deduct the full value of a Mercedes the year they buy it. You can even deduct these costs through accelerated deprecition methods if the business so chosses. Now, although the weight loophole exists, it would be very difficult to prove to the IRS in an audit that you are using the vehicle soley for the use of business. A Hummer or Escalade has very little if any “utility” which makes it hard to prove the vehicle is being used like other “over 6000 lbs” auto’s eligle for the special rule. You could claim that the use of the Hummer or Escalade is entirely a business car, but it would be difficult to prove to the IRS that the auto was not used in any personal manner. Commuting to and from work does not even count as deduction.

    Greg Hunter:

    I am not worthy to debate oil economics? Ok…There’s an intelligent rebuttal. But…You got it right. The U.S Economy is based on cheap oil. What is your point when stating: “planning for the future instead of free market solutions”? If oil companies really wanted to charge freely, the price would be 3 times what we are paying. From the data I have seen, oil is cheap.

    Why do so many people, which are usually democrats, hate free markets? Why is more government and more regulation the go to solution for democrats? Freedom was the priciple that the U.S. was founded on. In fact, our own founding fathers revolted when too much government was being forced upon them. They even executed an idea of throwing a boatload of government tea in the Boston harbor in protest let alone going to war.

    I was just reading the financial news and stumbled on this blog which appears to portray a profession and educated opinion. I think if you are going to write about something, make sure you know what you are talking about or at least designate that this is merely an opinion and poo poo session. People read this crap and think its fact.

    “Free market capitalism is the best path to prosperity”

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  33. David Esrati October 1, 2008 / 2:05 pm

    Alan- trust me when I say I know about 8 business owners that went and bought- and depreciated their Hummers/Escalades/Navigators when that “loophole” came out of DC. The IRS doesn’t check the odometer/
    I don’t hate free markets- I hate ones that pretend to be free.
    I take it you are for the bailout?
    Make up your mind.
    A free market system would let Wall Street fail.

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  34. Gene October 1, 2008 / 2:10 pm
    Let it FAIL. Elect Obama and take blame for the future depression. Vote for McCain and take blame for WWIII. You win either way.

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  35. Alan Stanwyck October 1, 2008 / 2:19 pm
    David,

    I am absolutely, unequivocally AGAINST the bailout. Thank got 93 democrats voted against it when they could have had 84 democrats vote against the bailout and still have the motion pass. The bailout is the biggest “moral hazard” in history, teaching and enticing people to take more risk than normal by having a backstop. It also teaches companies to strive to be “too big to fail” because failure will be worse than doing something.

    Formerly speaking about FDR….I just saw this online….

    The House failed to pass a bill Monday that backers said was necessary to prevent the next Great Depression. But it did get something done: It approved a resolution by Rep. Barbara Lee (D-Calif.) — who voted against the bailout bill — that commemorates the New Deal. The vote was unanimous. Way to get the tough stuff done Congress!

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  36. Mike October 1, 2008 / 2:39 pm
    Alan-

    You claim to be a CPA yet blindly read blogs as facts? Let me guess you quote wikipedia as the end all truth? Come on, your approach to online media is behind the times.

    Not that anyone cares, but I’m also anti-bail out. Bring on the faildozer.

    // Mike

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  37. Alan Stanwyck October 1, 2008 / 2:57 pm
    Mike,

    I don’t read blogs as facts. But many people do. Read around the internet and you will see enormous amounts of opinion presented as “journalism”. This is how people get bad information and terrible facts. I am all for free speech, and a lot of what I stated was opinion, but I think I also presented some historical fact (or at least tried).

    I could have quoted all sorts of sources, but I would have likely gotten flamed for those sources for being Right wing or Left wing or not being in line with whomever’s view was reading it. So I tried to stick with something relatively unbiased that had little opinion and more fact. Hence, I used wikipedia because it is simple, brief, and to the point.

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  38. Jeff October 1, 2008 / 3:37 pm
    Alan Stanwick: just another right-wing ideologue. Yawn.

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  39. Larkin October 1, 2008 / 6:20 pm
    Alan Stanwyck, CPA: no such person exists.

    I do so loathe people who post anonymously.

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  40. Gene October 1, 2008 / 7:43 pm
    Alan Stanwyck was the guy who tried to kill Fletch (chevy chase) in the movie Fletch. I think he was a CPA, and went to Provo, Utah a lot. His parents lived there, ‘member.

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  41. Gene October 1, 2008 / 8:14 pm
    Classic stuff from our friend Alan Stanwyck, in the MOVIE FLETCH

    Alan Stanwyck: If you reject the proposition, you keep the thousand – and your mouth shut.
    Fletch: Does this proposition entail my dressing up as Little Bo Peep?
    Alan Stanwyck: It’s nothing of a sexual nature, I assure you.
    Fletch: Yeah, I assure you.
    Alan Stanwyck: One thousand just to listen? I don’t see how you can pass that up, Mr…?
    Fletch: Nugent. Ted Nugent.

    His wife’s name was Gail, if you care.

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  42. Gene October 1, 2008 / 8:19 pm
    Are you Barry or Byron Larkin, BTW?

    Byron played basketball at Xavier, Barry, of course, shortstop for YOUR Cincinnati Reds……….. are you anonymous or gretophobic, or perhaps suffer from whogivesashitwhatpeoplecallthemselvesohwaitIdobcIambetterthaneveryone?

    Well, what is it?

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  43. J.R. Locke October 1, 2008 / 8:54 pm
    I do despise anonymity too. It is kind of like being a ceo, there is no accountability. Hardy har har.

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  44. Jeff October 1, 2008 / 10:32 pm
    I don’t pretend to know anything about high finance, so don’t post much on this finanical crisis. However, one thing the news is reporting on is the credit issue, wich is seperate from stock prices. The problem with this is the difficulty of businesses to obtain credit to finance their operations, and for consumers, tougher to get loans for things like cars, etc.

    This isn’t as dramatic as headlines about crashing stock prices, and will take a while to play out, but what it does mean is that that economic activity will be reduced as there is no money to finance things in the “real economy”.

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  45. Greg Hunter October 2, 2008 / 8:57 am
    Hey Alan, Sorry I was gone yesterday and I wanted to give some credit with the comment that gas should be triple the current price and I wanted to know what economic forces are in play that keep the price so low?

    Now to call out your hypocrisy as blogs have far less influence than the coke induced rantings of an obvious idiot.

    People read hear this crap and think its fact.

    “Free market capitalism is the best path to prosperity”

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  46. In the 'burg October 2, 2008 / 10:03 am
    Yeah, Kudlow is a coked-up idiot.

    But can we trust ANY of them to know what they’re talking about? Ever?

    Barney Frank, who seems to be doing a lot of sweating and hand-wringing to get a bailout bill passed now, actually voted AGAINST a Bush plan to regulate Fannie Mae and Freddie Mac 5 years ago. He thought the problems were overrated and that they would correct themselves—and any attempt at regulation would just exacerbate them.

    The writing’s been on the wall for a long time, folks.
    Johhny can’t pay his mortgage because Johnny can’t/won’t read, and Dancing With the Stars is so much better than
    C-SPAN.

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  47. Larkin October 3, 2008 / 1:56 am
    Gene, I do believe I posted a link to a profile just for you a while back. Anyone who cared could find it.

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