Who gets the $ (And the blame) ?

The bailout, rescue plan, or what ever we are to call it keeps morphing daily. Last week it was the auto manufacturers who were going to be saved by the plan; today I saw the Texas Independent Bankers Association had a representative in front of a congressional committee, and I wasn’t sure if she wanted something or was explaining that the independent bankers were left out entirely, which they have been.

When there is a trillion dollars being given away, every industry, investment firm,  mutual fund, bank, credit union ,etc. wants to make certain that, regardless of their financial health, they are not endangering their companies, stockholders, or even their employees by not getting  their share of the pot.

Now, it seems that Secretary Paulson, wants to change the whole deal, and as this is being written, he still has not revealed what he as in mind, but my suspicion is that this whole thing has become political.  I hope not, but don’t say I didn’t warn you.

There is a wonderful picture in our local newspaper showing Secretary Paulson testifying  to the House Financial Services Committee, with  Federal Reserve Chairman Ben Bernanke holding his head in his hands and obviously  wishing he were somewhere else instead of trying to tell these partisan politicians things they can’t understand about subjects they have never understood.  And we are talking about nearly one trillion dollars that is to be given away, and there is NO PLAN yet!

We have already given A.I.G. (American International Group) $40 billion, and who knows why, or what they are supposed to do with it, except hold expensive meetings in exotic places as a reward to their executives who screwed  things up in the first place!  I’m still not positive what it is they do-or have not done, but 40 billion bucks!  Lord, helps us!

Another $250 billion has already been used to help the largest of the banks in exchange for “partial ownership” by the government.  I suppose that is a possible way to get our money back.  Who knows?

Politicians who supposedly represent ALL of us don’t seen to have a clue, but the money spigot continues.  Keeps reminding me of the old bankers adage, “You can’t borrow your way out of debt.”  Guess we’ll see.

It doesn’t benefit any of us to blame the past administration.  No matter what they have done to (or for) us, they are home free, and a new bunch will be in charge of this mess.  The current economic crisis, a failing financial system, a war on at least two fronts at this time, a worn out military. a health care crisis, horrible unemployment, failing business situation, unbelievable debt, terrorisim at an all time high, and NO PLAN!  Thanks, W.

Sure, they will leave it to the incoming party and blame them for it all-and more!  Sometimes, public flogging might be in order.  At least, it would make most of us feel better for a few moments.

Some of my very conservative friends, tell me that it is all Bill Clinton’s fault!  Here we go!

Politics and Indecision

My vow to you, from the start, was to tell it like I see it with no baloney. A nice idea, but when politics enter into the deal, there is a LOT of baloney, but sometimes it is hard to say who is spreading lies, who is telling the truth, and does anyone know?

This seems to be the case with the big bailout… At first, the big banks had to be rescued so they would start lending again. The money (Our money) was to be used to buy up troubled bank assets, mostly securities backed by bad home loans, better known as sub prime mortgages. Loans were being made to the same banks who created this crap, sold them to anyone who was foolish enough to buy them, then held on to too many of these dogs after the market was gone, and convinced the government that they were going belly-up if we didn’t come to the rescue! And both parties DID it.

There was no plan, but a bunch of Wall streeters got billions overnight. Chase was given the money to buy out poor Wacovia Bank. Now, I see Wacovia is buying full page color advertisements! The brokers and investment bankers had the mother load, and did they ever load up! AIG was given a complete bail out, and then started giving parties in exotic places to celebrate the fleecing of the U.S. Treasury (Mainly US!) Still no plan.

Then we had a presidential election, and the politics really started. Mainly, each side wanted to blame the other for the lack of a plan, and the billions that have been given without understandable rules, oversight, or regulators.

Secretary Paulson said, “The facts have changed and the situation worsened.” Now, the administration wants to bail out not only big banks, but also credit card issuers (Banks again), auto loan companies (GMAC) and other huge non-bank businesses as well. Hey, it is all still the banks! Their big borrowers might as well feed at the public though, too!

Now, the Democrats want to include the ailing American auto industry, as well! Trouble is,the dems aren’t in power just yet, so they will have to fight to get their projects included, and we get to pick up the tab for this monumental mess.

A side note here. My garage contains a Prius and a Lexus. I feel guilty as hell, but most of the people I know have gone to foreign manufacturers. Why? That is food for another blog.

We are just in the beginning of the mess, and it must be solved by the incoming administration and congress, AFTER over two months of Bush and the guys running things their way!

Last week, a friend asked me where all this money was coming from. Good question. Do you know? We will print it, mostly in bonds, and hope to sell it in the market, because, at the time being U.S. Government bonds are still salable most everywhere. Trouble is we have to pay it back, hopefully without so much inflation, it will wipe us all out!

Glad we elected a smart guy to figure this out.

Everyone has their hand out, and we haven’t even gotten to the people who need it. They are WAY down the list. Most will never get anywhere near the front of the line.

Bless us all.

Simple Investment

Since I promised short and to the point messages on this blog, today’s idea is simple, direct and seldom used by the public. Investments in the market these days can be way too dangerous and complicated for even the most experienced investor to sort out all of the many pitfalls of the markets. While we are trying to settle in as to what the so–called Economic Stimulus Package will mean to the average person and how it will affect the various markets.

Well, here is an easy one. Municipal bonds have been around forever, but have you ever owned one? My idea is just a little different, and requires you to understand what you are buying. Your broker probably has access to them and will be quick to tell you what you should buy, but I doubt he will have what I am suggesting.

Basically, a municipal bond (a muni) is a debt insturment issued by one of the many government entities below the federal government, such as a state, city, county, schools, water or sewer districts, and many others. The interest they pay is usually semi-annual, and best of all, most are tax-free from Federal income tax, and in most cases from state income taxes in the state where they are issued. The ones I am looking for are NOT insured, (It just adds to your cost) and are issued by smaller counties, school districts, and towns that meet my criteria!

I like bonds issued in Kansas, Nebraska, Iowa, North and South Dakota, usually by borrowers that don’t default, they just pay! My favorite all time bond was issued by a small Mennonite college to finance a dormitory. I don’t belong to that church, but from long experience, I know that by their faith, they don’t default on their promises. The numbers regarding tax collections, overall bonded debt,and other information the borrower needs to examine are made available by the bond house underwriting the issue.

Because of the lack of insurance, they pay a bit higher interest than average, but the reasons I love these bonds, is that they pay! And on time! Farming and rural communities are doing very well these days, and they don’t like debt, hence they pay off on time.

The major players don’t like them because they are too small for them to make big commissions. so you have to do your homework on finding a broker. Look in the yellow pages or the internet for municipal broker-dealers in Wichita or Topeka, Kansas, Fargo, N.D., Souix Falls, S.D.or Des Moines. It takes a bit of research, but you will find some good people who will not try to force junk on you, and may well not be able to come up with anything, but they will have your name when the time comes.

Many of these dealers also sell Industrial Revenue Bonds (IRBs) so be careful, this is NOT what I am writing about.

There is a lot more information, but this might help you get started.

Poor Losers

Yesterday, the day after the election, I arranged my errand running, so that I could be in my car to  listen to Rush, and the boys and girls on a conservative radio station in our area.  I couldn’t wait to hear what they had to say about this historic election.  The ranting and blame placing was pretty much what you would expect.  The electorate was voting for socialism in the U.S. A., the conservatives did not make their point, and it was a vote against George W. Bush.  I believe the last two were valid reasons, and the one on socialism was not.

Nowhere, was there any statement that these radical right wingers who claim to be so right might have failed to get their point across to the American voters.  No self-blame from the master of the EIB, who hasn’t made sense in twenty years, but has made millions by preaching his message  of hate and division.  We have a new day coming in government in this country, and regardless of political preference, get used to it, because we all have a stake in what happens.

Our economic problems worsen every day, and will continue until some strategy is employed to use the nearly ONE TRILLON bucks that the congress dropped on Wall Street and the same people that created the problems!  That is OUR money, even if it was taken from the Federal Reserve Bank, the FDIC, the Treasury Department with NO plan.  This is a problem that will truly affect us all, and may have already had a negative impact on millions of us!

If you have mutual funds as your savings or a part of your retirement plan, you have lost real money, and it very likely will get worse!  If you are a public employee, your retirement funds have taken a big hit in every investment they own.  Your home and and any other real estate you own have taken a BIG hit.  It goes on and on, but the bottom line is that the only way out is for our U.S. economy to recover, and there is not a plan!

The gifts of billions to the nine largest banks is NOT a plan, it is a gift to the thieves who caused the majority of the problems.  Greed has always been their answer.  This is where President Obama might start to turn things around.  We must hope that he will find the right people to get controls that will work.   I believe he will.    He must.

As a banker, I’ve always tended to oppose government regulation, but this is different.  When we put up a trillion bucks, we must have real regulation that is understood by the regulators, the regulated and by the  public.  It wont be easy, but we have the right man in charge, and he is smart enough to understand the solutions offered.

More about this later!