I Want That Job

Although it hasn’t been finalized, it appears we taxpayers are going to make a 17-20 billion dollar loan to try to keep the American automobile manufacturers in business. Unlike the bailout of Wall Street, this one has some conditions attached. It will be called a bridge loan, and a repayment plan is to be negotiated with the borrowers, and might mean the firing of G.M.’s CEO, Rick Wagner. Somehow, if that happened, I think he will wish congress a Merry Christmas by telling them to please notice the mistletoe under his coat tails as he departs. He is young, handsome and rich, and will get along just fine on the millions he has made with GM. This morning, when asked at a press conference if he was going to resign, he said, “After all I have been through, do you think I would leave now!” This man is a tuff guy with a great attitude.

I was certainly impressed by the G.M. management team that accompanied him. Sharp, well educated and trained car guys who are really trying to take this company back toward its former glory.

Anyway, it appears congress want to appoint a car zar to oversee all this. That’s the job I want, and would be able to start immediately. Just a modest salary, and the ability to appoint a few relatives as assistants.

Car Zar! Wow, doesn’t that sound impressive? There probably isn’t that much to do, except be briefed daily on what was happening. Maybe I could get Governor Rod Blog of Illinois to get me the appointment.

After all. I used to work for three different divisions of G.M, was general manager of a metropolitan G.M. dealership, then later became the president of a couple of banks which were successful. I am used to hearing from the executives of G.M. at many different levels, although it was always from the top down. I was always willing, though never asked, to tell their management what to do, although some of my suggestions were physically impossible. Sounds like a good match to me! I could start immediately, but might have to work from home till it warms up in Michigan, or, of course, use one of their corporate jets to commute.

May I use you as a reference?

One thing I thought was great at the press conference, was, when asked if he thought G.M. could possibly match the quality of foreign made automobiles, Chairman Wagner, said, “Just get behind the wheel of a new Chevrolet Malibu, and you will have the answer!” Pretty brave, and good for him! By the way, I must admit I have never been behind the wheel of a new Malibu, but after that, I would certainly like to try it.

Later

Promotors and thieves go where the money is.

Ever hear of a scheme called, “portable alpha?” Most people haven’t and wouldn’t understand it unless they have had contact with the far side of the securities business. But many of us are affected by this complicated investment strategy which has invaded the pension funds of many states for billions of dollars of losses, most of which will probably never be recovered.

Who will make good on the losses? Well, depending on state law, most of it will be made up by the taxpayers of the states involved. Another crushing blow to the American taxpayer who is living in a bankrupt economy.

Portable Alpha is the name of an extremely aggressive strategy using sophisticated investments including various derivatives peddled to pension funds and other institutional investors when the stock market was rising to unheard of heights. Wall Street Journal reports an estimated 74 billion has been invested using portable alpha. Pension funds seem to be the hardest hit including Pennsylvania, South Carolina, San Diego County, Kansas, and Massachusetts. Unless a miracle occurs, investors in alpha funds will find they have bought into a highly leveraged bet on the market and in hedge funds. They will lose a LOT of money!

The idea was to use portable alpha is to match the market with a small dollar amount by using derivatives such as futures, and use other funds remaining for direct investments. Trouble is, (in my opinion) many managers of these funds didn’t understand what they were committed to. Portable alpha was a good idea when started in the late 80s, but no one seemed to know what would happen in a market that fell as fast as the current one. Even the pros that used portable alpha have been burned lately.

Years ago, when I managed investment accounts for two banks, I asked our governor why the state employees pension fund’s board of directors did not include any conservative bankers or investment people, and his answer was, “They tend not to take chances!’ The board was dominated by promoters, and other “Investment” people, who sold the state troubled real estate assets and even a failing business deal or two. I sure didn’t want the responsibility, but still, I wish he had listened. Wonder who oversaw the state’s investments in portable alpha.

Sorry this hasn’t been a spellbinder, but it is just the kind of mistakes that are exposed in tough times that can affect us all-a lot!

Later.

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!

ELECTION - AT LAST

In just a week this election will be over! I have my personal choices, but most of them are no longer in the hunt!

I do know one thing for sure, we will soon be rid of the worst president in our history, and if our country can survive the unbelievable mess he has left us, we will be fortunate and blessed. I, personally think Senator Obama is our best hope, mostly because he in intellectually the best bet, and his running mate is capable, if needed. I can live with either party, just as long as we can remove this fool we now have, and the people he has burdened us with. It seem that most of them have long since jumped ship, as well they should have.

I never dreamed I would vote for a black man for President of the United States. Guess it just shows, if you live long enough, you might see everything. I have a close and wonderful friend, a former Kansas Senator, and has had many other accomplishments, including getting me to become a pilot! We often talk, and several weeks ago, prior to the Democrat convention, I asked what he thought about what was happening with politics, of course meaning, what did he think of Obama. I said, “Remember, he is half white.” He said, “I know, but he looks like me!” What a world! He was wonderfully right!

No matter who wins, we will try to survive, and do our best to become the best in the world, again. It will be a long and difficult journey, but there will be a way-there always has been.

God bless all, which He surely has.

EC

Oversight and regulation at its worst

In the business section of the Phoenix newspaper was a small article about a BIG problem facing American small business.

After over thirty years, a family business that developed property and built houses, announced that they were closing their doors and ceasing operations, laying off all 60 employees. Customers who were in the process of buying one of their homes would not be allowed to close. The builder has deposits from these customers and is promising to refund the buyers deposits, but can’t complete the sales, as his bank, which he didn’t want to name, will keep all those homes as collateral! I find my self mad as hell!

I don’t know the bank involved or do I know the builder. I do know a lot about what is going on, and why, at least I think I do. What a shameful thing when an honest business man with a good reputation for thirty years is caught in this web of over-regulation.

Earlier this year, the bank re-appraised the builders land and housing assets, probably at the direction of bank regulators, either the FDIC, the state banking authority, or the Controller of the Currency. Naturally, the values have dropped because of the current mortgage mess. This happened to thousands of banks and their builder customers. The regulators have, as they have so many times before, panicked and demanded that the bank “write down” these loans to their re-appraised values, put them on a “Problem Loan List” and refused to permit any kind of reasonable work out with the borrowers, many of whom have just thrown up their hands and told the banks that they couldn’t meet these new, sometimes unreasonable demands.

All this has nothing to do with the sub-prime mess. The banks that are involved in that deserve to be penalized, and watched carefully. Instead the regulators have stomped on the legitimate builders, and the banks they depended on for financing. At the same time the government has come to the “Rescue” of the large lenders and creators of the sub-prime mortgage mess, by giving them the bail-out trillion bucks, and are trying to encourage the Wall Street investment bankers to start lending more money, but so far have not turned a tap to the smaller and mid-sized banks who can’t take care of their customers. Where in hell is the justice?

Sure, many banks went too far in financing developments and houses, and their concentrations of these types of loans need to be slowed down, but to penalize an entire industry for something that can be worked out is worse than awful. How about outrageous?

In the case above, it would seem to me that it might border on being litigous. If the builder can’t pay his sub contractors, his other bills for materials, and the bank is taking all of his assets, and 60 employees have lost their jobs, and no one has done any thing wrong, where is the justice-if any?

My own opinion for many years has been that government always achieves the opposite of what it sets out to do. Think about it.

Later…

Almost Over

Many years ago, Johnny Cash recorded a song named, “The 20th Century is Almost Over, and although it was never big hit, it was one of my favorites of the era. Some of the words still are in my head. “What ever happened to linolium floors, petroleum jelly and two world wars? Well, everybody is waitin’ for something to happen, hope it don’t happen to you.”

Well. in just nine days from this posting, we all are going to find out what is going to happen to all of us who care deeply about this country of ours. We just went broke, but none of us know what is going to happen, but I hope it don’t happen to you-or me.

I got an email from an widowed friend of mine, who has some short term memory problems which has caused her to quit her favorite pastime, playing bridge. She knew she wanted to vote early, so went to the county elections office, and was amazed that there was such a large crowd, but she got her ballot, and told me she had voted for Sarah Palin, because she was with God, somehow. Couldn’t remember about any of the other candidates, but thought she had done her best. Made me think of the song.

Most of the decided voters have cast their ballots early, voting for their favorites, with almost all of the interest in the presidential race. My friend wasn’t sure who was running with Ms. Palin, but she had her reason for her choice. The more I thought about it, the more it made sense because she didn’t hate any candidates, she just wanted to be on what she thought was God’s side. Better reasoning than some of the hate mail I’ve been seeing.

One of my extremely conservative friends sent me a long post with thundering background music warning that all the problems we are now facing have been caused by every democrat that ever held office. The sub prime mess was caused by Clinton when he suggested Fannie and Freddy might look into ways to get home loans for those who couldn’t qualify under the strict credit guidelines in effect at the time. It didn’t ever go anywhere at that time. As I remember, we had a Republican Congress at the time, and no one wanted to push the deal, including President Clinton.

Most of the current problems facing the banking industry started with the removal of the Glass-Steegal Act, which was a product of the Ronald Regan era, and the pressure of Wall Street investment brokers insisting that they be allowed to be in the banking business, with sharply reduced regulation. Well. it happened, and it happened to you -and me.

Then the bailout money came from you and me, and they want and need a lot more! This morning, I saw that the large life insurance companies now want the same bail out, so their policy holders wont be frightened. Ridiculous! Who has a plan–NO ONE, SO FAR!

“Everybody is waitiing for something to happen, hope it don’t happen to you!” But I think it already has!

Keep the faith.

Election approacheth

My mail ballot went to the Election Commissioner’s office last week, so it is too late to change.  Like most of you, I’ve received more emails them I ever wanted.  Now, the senders are using scare tactics of every kind, most of them outrageous and not remotely connected to the truth.

I think it would be fun to send all of the hate mail from one side to the other, and let them know other points of view are certainly out there.  One thing I truly believe is that we need a new administration, (a new congress would be nice, too).

I’ve often wondered if the American public would be well served in this time of crisis by turning the government over to the brightest minds available.  How about Warren Buffett, Jack Weltch, Bill Gates, taking over for a couple of years, and use their brains to get us back into some semblance of order.  It couldn’t be worse than it is.  The people leading our government have failed us all too long, and no matter who sits in the President’s office wont be able to fix it.  In fact, I doubt either one of them could even serve on a committee to advise.

We just gave away almost a trillion dollars of taxpayer’s money to the same people who created the mess, and this morning they were warning that they must have more! The guy who runs Bank of America was on 60 minutes last night, and he would be a good addition to “The Group.”  Did not participate in the sub-prime mortgage mess, and acquired Merrill-Lynch without missing a beat, or the use of the bail out money!  Somehow, I think we will still be on the short end, but at least we are being hosed by capable people.

Later

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