Lenders’ actions show they think properties are not worth pursuing.
Storyline: On June 19th if some act in greed, en masse, the global economy will totally tank. What is special about June 19th is that in the financial realm it is known as the quadruple witching hour. The final hour of the stock market trading session on the third Friday of March, June, September, and December, when in addition to the expiration of option contracts and futures contracts, which indicates a triple witching hour, the expiration of single stock futures (SSFs) also occurs.
What is extra special about this June 19th is that by raising the H1N1 Virus to level 6 in an emergency secret meeting today, establishing a global Pandemic status, it triggers the force majeure clauses in contracts. Force majeure or “act of God” is somewhat ironic because if there are acts out of greed then the very system that permitted it will collapse by an act of God. Normally a force majeure clause removes the obligation to honor a contract, due to natural events beyond one’s control. So while in reality the somewhat mild H1N1 (swine flu) virus which is hardly a threat or cause for alarm could be used as a legal excuse to not honor contracts. However the real reason the contracts cannot be honored is not a result of the virus but rather the greed and corruption of those that had been running the system which failed because of imbalance due to greed and corruption. Of course if certain numbers can resist temptation, acting from a holistic perspective, then the system, as a result of collaboration, could be reconstructed without a total failure, or maybe not.
This could really get interesting and I am starting to see that the truth may be making a play to bring certain things to light and triggering a major systems evolution, and in fact a realization is coming that will bring change. It is a bit like a game of chess.
See it does and is happening in reality; check out this Google news search for force majeure.
http://news.google.com/news?pz=1&ned=us&hl=en&q=force+majeure+
At one link we find this good question, what is the answer?
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Economic Force Majeure
Source: Blake, Cassels & Graydon LLP - Does a severe downturn in the economy constitute an event of force majeure? If you can no longer get financing because banks do not have the money to lend, can you claim force majeure because events are beyond your control?
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The answer could be yes and no, depending on the role one is playing and in what context.
Here are some perspectives I proffer.
The Global Accounting System (monetary systems) are a man made creation it is not natural. If the Global Accounting System were based on natural principles we might say it was then beyond our control, however it is not at this time. The Economic System is actually manipulated and some things are contrived by independent agency attempting to produce effect, in other words unnatural cause. We have an economic system where there are some natural market forces at work but it is really dominated by human nature. Of course there are events that influence the system both natural and man made. In this context we might say the answer is “no”.
We also have the economic participants who must in order to live and sustain themselves utilize a system that is beyond their control, it is controlled by others sometimes to the controllers benefit and not that of the economic system participants as a whole. Therefore the inability to obtain financing to allow continued value creation could be considered beyond their control. In this context we might say the answer is “yes”.
One could also open up a can of worms with something I have pointed out long before, man is a part of nature, so any thing man does is an act of nature in a greater context, of course that also means that man is subject to the laws of nature, and if doing something that causes imbalance, threatens life or creates suffering, it will be corrected or if that is no possible destroyed by the natural forces of nature. In other words when an element in nature stops listening to the signals from the rest of the elements in the system it may cause dissonance and disruption in the system and threaten the whole body and therefore for the body to survive, if it cannot be corrected it must be destroyed.
There will be much greater understanding and realizations as one completes the articulation of economics in an easy to understand manner from a scientific and natural perspective and disseminates it. This will highlight the flaws of the current systems design and destroy the illusions that it is based upon that lead to detriment not benefit.
I also note that many in executive management may not intend detriment however when seeking guidance from those with vested interests one is getting distorted or inferior advice which results in detriment to the majority and the system as a whole. Management’s key deliverable is the correct choosing of individuals or entities to play support roles which include the ability for discernment of the truth and reality behind appearances and the ability to detect a compromised agent or those lacking in capacity.
Dear President Obama and Secretary Geithner,
I have read extensively about the issues of this crisis you are both facing and I certainly sympathize with the situation. However, as pretty much the average American, I wonder why this is so complicated. We tend to over think, when simple solutions might be the best. While I do not have the knowledge to put all the numbers together, I do look at the situation and think, why should the investment markets continue to have their risks covered. They knew what they were doing or if they did not, then they deserve what they are getting.
But the middle class American is the one that cares the burden. So I end up asking, how do we get out of this financial mess? At this point, we have a two-pronged issue. One, we need to stabilize the financial markets by allowing there to be some understanding of the risk in the loan portfolios that the banks have created. Two, we need to provide consumers with some added income to spend to get the economy rolling. So the question is how to we accomplish this?
To me the answer is found in a very simple and straight forward process.
Step one, all consumers would be eligible to go to the bank of their choice and refinance their primary home loan. The process would be:
· Have an independent appraisal done.
· This appraisal would be used to issue a new loan against the property the terms would be 4.5% interest for a maximum of 30 years.
· The amount of the loan would be the “current” appraisal value, capped at a 20% reduction from the original appraisal value or the amount owed on the current loan.
· Only primary residences would be eligible.
· The banks would send the revised loan total to a fund set up and managed by the government. The existing creditors would then apply for payment from the fund for the note they hold against a home. It would be up to them to unravel the CDO and figure out who owns what and make claims against the fund. The fund would pay out the “new loan” amount as payment in full on the CDO’s.
Here are a couple of examples:
Example 1 - Home purchased in 2006 for $300,000, 6.5% 5 year ARM, nothing put down. Current outstanding loan payoff is $290,000 and monthly payment is $1,896.
Reappraised in 2009 for $225,000, new loan created for $232,000, 80% of $290,000, at 4.5%, 30 year loan. Monthly payment would be $1,175.
Government fund would receive $232,000 to “payoff” current debt holder. Current debt holder would get $225,000. Consumer would have security in home at a new adjusted value and an additional $721 per month to spend, assisting in an economic recovery.
Example 2 – Home purchased in 2000 for $300,000, 7% interest, 30 year mortgage, 20% down, current payoff $250,000. Monthly payment $1,729. Does not need refinancing since home has not “lost value”.
Reappraised in 2009 for $295,000. New loan given for $250,000 a 4.5% for 30 years. New monthly payment $1,266.
Government fund would receive $250,000 to “payoff” current debt holder. Consumer would have security in home at a new adjusted value and an additional $463 per month to spend, assisting in an economic recovery
Couple of other keys to making it work:
· No credit check, if the person is in the home and is not over 60 days late, they get a loan.
· No title search, assuming they bought the home and a title search was done.
· Simplify the closing process to minimize cost, government pays 100% or have the banks cover it.
· All loans must be done through the banks, can not be resold by the banks for a period of 5 years.
While I know there might be issues this seems to address the two main issues facing our country from the economic point of view. I wish you well in your efforts.
Please let me know if you need any clarification of this thought process.
Larry
I think President Obama MUST act (through the Treasury and the FDIC) to put a plan in place that provides details of how toxic mortgages will be handled to be fair to mortgagees and make the banks (the upper management, the boards and the stockholders) pay the majority of the costs. The "stress tests" should be made tougher than has been indicated in the press, and banks failing it should be taken over, the upper management stripped of their pensions as well as their salaries, and the bank broken apart and sold as pieces. The apparent "fear of using the word Nationalization" can be overcome when the results of that takeover become clear. A large number of economists and even Republicans (though not those in office) support measures that are similar if not identical.
I think the obstructionist Republicans should be challenged as to what they would do and their approaches shown to not be workable.
But the biggest thing is that some positive steps need to be taken quickly. Many times things are rushed when a more measured approach would work, but with the economy accelerating in its downward path, time is of the essence in this situation. Even if the action is not perfect, bold steps MUST be taken soon.
Even though it will increase my taxes, I'm ready to support Obama's budget and work to overcome the pressure from the powerful interests against it. Health care, energy and education reform are worth the sacrifices required from all Americans. But I'm concerned about the way the administration is handling the banking crisis. The slow drip drip of taxpayer money into Citibank and AIG looks to me like we are just postponing the inevitable pain required to solve the bank and credit crisis. Many economists and blogs I respect suggest that until the banks are cleaned up we will follow the painful example of Japan. See for example blog written by Simon Johnson of MIT at http://baselinescenario.com.
Obama's economic team may have excellent reasons for choosing a different strategy, but in my opinion they have not done a good job of explaining their reasoning or their plan. I urge President Obama to join Simon Johnson, Planet Money and others who are doing an excellent job of educating those of us who until recently had little knowledge and less interest in economic theory. Once Obama supporters have confidence in the way the banking crisis is being handled we will be much better able to face those who oppose the budget or cry "socialism".l
You hear it once in a while in a comment, under once breath, in frustration or at an Obama event the other day: “Send the check to my mailbox!” It is not an option that is seriously being discussed - yet. But why not?? When former treasury secretary Hank Paulson came running to congress last fall with his 3-page bank bailout plan in hand, Congressman Kucinich, for a brief moment, shone a bright spotlight on the obvious lunacy:
I propose the following idea to address the banking crisis:
On behalf of the taxpayers, why not create a non-profit trust, named, for example, 'Citizen’s Resolution Trust (CRT)'. This is not about buying bad debts ala Resolution Trust Corporation. That is old school. CRT would function like a taxpayer's 'sovreign fund' that will exchange Government issued T-Bills (or other Gevernment issued debt instruments) for devalued investments held as bank capital at a premium to current market value. This will help shore up the banks balance sheet so that they can start lending again.
In exchange for this service/assistance, the CRT will be paid with special share warrants issued by the bank to cover the premium (over market value) and the swap fee.
Details of how this mechanism may work is written in teh Extended Post Text.
Contact: Alex.Karoub@gmail.com
It has been my perception that what has driven some Americans increasingly in the past two decades has been personal greed; greed not for just money but for power, control, influence, domination, security, knowledge, ideology, ..., all for individual or limited closed association/club benefit. That is not only the mentality of individuals, but of people operating in government and business as well.
We now witness the results of greed by a select few:
Corrupt and special interest government officials who set themselves above as aristocrats regulating government for their own investments or hidden ownerships in companies and organizations. Many who also take bribes and illicit favors from corrupt lobbyists.Laws are actually written/drafted by who? Do you really think your legislator, congressman, or senator sits down in front of a computer or uses his own pen and paper? Or, did you think it's his staff? It is lobbyists who actually do 99% of the work; work they have vested interests in, to see it is written the way their 'client' wants it worded. Do you as an individual have lobbyists employed by you? Financial institutions that cheat and steal from the unsuspecting, far beyond the weak laws of usury. Trustworthy? Bank & 'Trust?' Wanna givem another bailout for cheating? It looks like lobbying paid off for the financial 'institutions' (we have all been taught to 'respect?' the term 'institution?', but maybe we are learning). Insurance Companies that 'legally?' bribe law enforcement, judges, and congress/legislators with grants, equipment gifts, perks, and free trips in order to gain unprecedented influence/control -- everything from mandatory laws, to not or barely paying claims, to price fixing, to all sorts of corrupt and unfavorable methods imposed on individuals. Do most people realize that premiums (a name of 'respect?' for monthly payments you are charged) are used by Insurance Companies to pay for -- grants, equipment gifts, perks and trips as payoffs for public laws, regulations, and controls that the public does not want. It is a form of taxation represented/controlled by insurance companies, not taxation with public representation. It's a twisted form of taxation charged by insurance companies. Manufacturing barons who import economic slave labor and outsource to slavery. Pharmaceutical corporations that cover-up sickness and death with misinformation in order to push up profits. Weapons manufacturers that promote violence, war, and enduring sickness. Energy companies that monopolize production/prices and cause destructive environmental damage.American Companies, or those using names, that import/offshore products who turn a deaf ear and blind eye to safety, quality, and poisons.Service providers that care not about consumers but are strictly money driven, with less regard for employees; employees who suffer with unreasonable demands for performance and who are not paid a living wage. Private educational institutions that cater to the wealthy who have abandoned the public. The concept for the masses of "let them eat cake"; they will eventually go away from malnutrition of education because it will make them perish; and, those who survive can be the servants. Suburban Public School administrators in growing housing markets whose actual and hidden agendas are to serve land developers and government aristocrats. They play statistical number games made of fudge, intentionally choking out struggling students by actually encouraging students to drop out or be 'home schooled' by mom or dad. That's how suburban schools 'look' more attractive to potential home buyers, with faked academic 'success' -- faking the 'No Child Left Behind' statistics, a real game, using kids as pawns. But aristocrats brag, statistically they look like they have done a good enough job to re-elect them. And, most importantly to them, they can continue to reap the profits from either the land they own or are financially connected with.Inner City School administrators in decaying areas that hopelessly cope with being under funded, attracting the poorest quality teachers. Children do not choose to be born into poor families, or choose uncaring parents, nor do they choose parents that are ignorant and uneducated. Do these kids have the hope of opportunity? They are pushed aside as the burdens of a greedy society, in hopes they are not seen nor heard from now or later in life -- good to be used as the pawns in wars, or workers for catering to the wealthy though. Employees of city/county/state/fed. institutions (schools, universities, jails, prisons, leases/sales of buildings to Gov., contracted services, hospitals, VA facilities,...) who take kickbacks and gifts, in return for higher costs and sweetheart deals with companies often owned by or financially benefiting government aristocrats.Major colleges and universities chasing the buck by catering to overseas students. They somehow brag of a 40% to 60% foreign enrollment, while American students grasp for help and aid. Community colleges that are given the leftovers in funds, coping with unrealistic expectations of graduating students or preparing them for major colleges. Even with 100% tuition/books paid, it is unrealistic to expect students to juggle working full time jobs (for food and living) while going to school and studying full time. It is not surprising to see such an astronomically high dropout rate in America. Capitalist have made it clear to students, not to have hopes that are too costly; or, they will import already educated talent. Do wealthy capitalist require students in their families to work full time at low paying jobs while pursuing higher education's? Maybe they simply know it's a story made up for the 'less fortunate', like a fairytale dream, achieved by one to two percent and used as shining examples, stories told to pacify the masses. Those with capital also know, they can hire a well enough educated dropout at a reduced rate to do the job of a graduate, a real bargain. …
We could each recite instances far beyond this short list, and it is all for greed. People’s greed has been rooting through our nation and causing so much destruction. Certainly money has been a primary instrument of their greed, but their other instruments of power, control, influence, domination, security, knowledge, ideology, … have all been used to chip away and damage each of us who together form our great nation. With renewed vision and focused determination we will heal and rebuild to become more active and much stronger.
To learn more details, you can read my other three blogs about 1) Educational Devastation, The Need for an Entirely New System, 2) The Auto Industry, A Few of My Personal Experiences, and 3) Invention, Innovation, and Education.
Blog members can reply here, or anyone is welcome to contact me at: Alex.Karoub@gmail.com
PROPOSED APPROACH
EISP - Essential Industry Stewardship Project: Eliminate the "bailout" and "bankruptcy" onus by initiating what is genuinely needed, possible and respectful: Government Stewardship of essential industries through these treacherous passages. In order to encumber government funds, entities such as auto makers, banks and insurance companies must engage in stewardship.
1. Stewards will have the responsibility and authority to engage, support and modify productive industry functions, especially those that impact what we have come to call "main street": jobs, effective & honest products (e.g. good loans, efficient cars, sound financial instruments).
2. Stewards will identify and be empowered to alter or eliminate waste be it in service of greed and excess or short sighted application of quarterly numbers vs. long term productive strength and vision, or simply benign neglect/ deferred maintenance. 3. Industrial Stewardship will include both management and labor so that union excesses are altered along with those of management.
4. EISP will be empowered to negotiate with creditors both domestic and foreign taking into account the impact on the health of downstream institutions. However the impact and health considered will again focus on "main street" rather than upper management or maintenance of top heavy management or labor relations.
Please share you comments, improvements and promotion to those who enact.
Renegade Republican House members voting no on the bailout package yesterday ultimately defeated the bailout bill. It is suggested that their plan had been to peg the democrats along with Bush to being responsible for the passage of an unpopular bailout of Wall Street at the expense of Main Street. The political gamble failed and ultimately left egg on the face of McCain. Failure to pass the Wall Street bailout bill hands Republican John McCain and the Bush Administration a Stunning Defeat.
The full article can be read by clicking on the link below.
"Renegade Republicans Gamble on the Bailout and it Blows up Like the Economy"
It is clear to me that many Americans just do not understand how politics work, what constitutes political suicide, and why pandering only to the fringes either on the left or the right is a bad way forward for this country.For example Obama has been very clear that he opposed going into Iraq from the start. But since he was not President at the time and clearly the Republican controlled congress and Republican President thought otherwise, there isn't a lot that Obama can do to change the past. We can moan and cry and close our eyes and stamp our feet but the fact remains WE the American public did not stop the Iraq invasion when we could of. Blaming Obama for not ending the Iraq war is ridiculous. The fact is we are there now. The damage has been done and now it would be completely irresponsible to just wipe our hands of the mess we have created. So here we are, it is September 30th, 2008, and Barack has been talking about ways to wind down the war in Iraq and get our troops out in the most responsible manner both to our troops and to the Iraqi people. But of course people on the left fringe are outraged that Obama is not absolute enough in saying that we should pull out the troops ASAP and the fringes on the right are calling him a "cut and runner" and someone who doesn't support the troops and all kinds of other ridiculous talking points.
The fact of the matter is that Obama is our best chance to move the country forward but he alone can’t do anything by himself. He is only as strong as the overall public opinion is. If 80% of Americans think offshore drilling is the solution then WE are at fault for not better educating the American public as to why this is not true and is in fact harmful. It isn't the responsibility of Obama or any politician for that matter to reverse public opinion for or against a particular issue. It is Obama's job to lead and efficiently direct the bottom up groundswell that he is trying to create. Without that groundswell Obama is just another tiny voice in a sea of inconsequential politicians and fringe 3rd party candidates.
On the other hand someone like Caribou Barbie is all about placating and pandering to the fringes on the right.
Get Active and Get out the VOTE!!
Correction Appended
A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar?
It does to Sweden. The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent.
But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing.
The circumstances which have come to light in the past few days, the financial crisis, that potentially holds the balance of this country hostage, waiting for a positive solution. What I'm a bit confused about, and sadden by, is the fact that "nothing" was done as far as a major investigation when foreclosurers became such an issue months ago. Had the Congress intervened at that time.....Had the appropriate Committee/Commission raised it's eyebrows with demands to review/investigate heavily: procedures, practices, balances on the books....maybe we could have detoured this catastrophe we face today.....at least lessened the blow.
Oh! That's right! This current administration is all about deregulation! "The sky's the limit and you ol' boys and girls at the top! take all you want ... this is the land of the rich to become richer!!! Besides, those morans who are getting the loans.....they don't care about the fine print! They just want the money....NOW! Accountability .... you don't have to worry about that because of the wonderful deregulations we have in place for you." This has been the way of the "Decider" and his crew for years. Do we want to continue this path of degradation? I'm thinking not.
Unfortunately, the greed bug hit quite a few in our need to have a better life, and this is the land of golden opportunity, Americans have gladly assumed the cost of their better life on credit. We are guilty of grabbing the golden "credit" ring.....unfortunately, only to find it's nothing but wroughtiron and worthless on the market, however have been expected to pay inflated prices with our signatures on the line. We have allowed ourselves to be spoiled and cry now that we have been deceived in our demise having to remove our "rose colored glasses" and seeing reality. Now our government has been to sent in to rescue us from drowning. Even though, this may be a very good thing for people to realize what is truly needed in this country.....and that is Sen. Obama's guidance to a better way .... fair and equitable.
What I shake my head about is the demand from Paulson in that he get his "check" yesterday!! without question. What is he hiding???? What is he trying to "cure" before anyone has a chance to study the disease. Has anyone investigated his books? Probably not.
I see part of our "new change", in Sen. Obama's proposals, is that we must take responsiblity and work for our stance in life. We have allowed, to a certain degree, what has happen. We have fueled the lenders because of demands of better living. Sadly, due to "no guidelines" given to those taking out mortgages in good faith or being slammed with higher interest rates on the credit cards we hold due to one late payment.....we have experienced quite a shock. However, we as "Joe Public" can not budget the way the government obviously does at a whim.....now we all will have to pay the piper for his song. We have lived on having material items now for so long on credit....we barely remember any other way. And we wonder why we can't save money. Ouch! Reality!!
I always pondered, and probably would not have been a good business person, but would it not be better to keep prices lower and sell all your products....then have the price so high that you must discard your inventory for nothing. Probably the wealth factor would take longer to achieve, but would it not take care of most all needs to have a good and respectable living? Of course, in business, there is a certain amount of cushion for declared losses to offset the gains. How convenient. We are all not meant to be wealthy....however, we do deserve to live without "fear" of being left with nothing even though we work to maintain our acquired level of living standards we have set for ourselves. Once again our trust level has been compromised. How much are we going to allow or accept?
Sen. Obama is in there fighting for the "real" American. He is in Washington working with administrators and Congress to devise a plan that will be less painful for the moment, but have better results to the healing and true growth in our future.
This is quite the "speed bump"......hope we all have a very good mechanic! That we can look forward to in November by putting Sen. Obama in the Presidential Office.
At least that's what I'm working for.
