If you haven’t heard, I will be the host of “Mutual Fund Circus (TM),” Monday-Friday 5PM EST (4 Central) and 8PM EST (7 Central), on BizTelevision, a new 24-hour “Main Street” television network, beginning October 1, 2009.
I will also be the host of “Mutual Fund Circus for Kids (TM): Talking to Children About Money” airing Saturday and Sunday mornings on BizTelevision Fall 2009.
Therefore, my new duties as executive producer and host of those programs has and will continue to greatly diminish my blogging time, especially on matters of Treasury, Fed and fiscal policy, in this blog.
We are calling, Mutual Fund Circus (TM), “Your 401(k) Friend,” to which of course we will address investing, retirement, and financial planning issues for employees, self-employed, business owners, as well as those under 457 Plans and 403(b) plans.
My new blog is http://mutualfundcircus.wordpress.com/, where I will be spending most of my “free” time.
I hope to see you there.
Another NYTimes.com article about how banks nixed the “cramdown” provision in congress, preventing legislation that would let bankruptcy judges reduce the amount of principal on a residential mortgage. As it stands, the banks want workouts with homeowners that only reduce the interest rate or monthly payment, but keep the entire principal intact.
This is another sickening article about how dishonest banks are, and how they are sticking it to their customers, the little guy, so I won’t go into much detail about it.
But it seems that banks are a little bi-polar on how they are reacting to the current economic climate: they don’t want to reduce mortgage principal, which would help homeowners continue to make mortgage payments and discourage walking away from a house, which would mean better loans to sell as MBSs and higher revenue for the banks; they don’t want to sell “toxic” loans they hold because the writedowns they would have to take on them would show them as less profitable as they are currently allowed to “be”; they don’t want TARP money and by extension government involvement–yet they take it, and they do nothing to help their customers who are bound to default if they can’t modify their payments, which will result in more “toxic” loans, fewer loans sold as MBSs, further writedowns, and less revenue across all these avenues.
Isn’t that the definition of a vicious circle?????
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From the NYTimes.com article.
It is worth reading the entire article, as it will give you a good belly laugh the whole way through.
I will paraphrase it here, but it is succinctly put in the article: the “Homeland Investment Act” was a tax break to US companies doing business overseas. You bring overseas profits into the US for US development (building, jobs, etc) and you pay 5% tax instead of 35% tax.
But you can’t use it, SPECIFICALLY ENUMERATED IN THE LAW, for share buybacks or dividends.
So, what did US multi-national companies do? They used 92% of the money for share buybacks and dividends! HA!
Now, if this doesn’t warm the cockles of your heart, then you may not be a true red-blooded American.
Low tax, companies distributing money to THEIR SHAREHOLDERS, the majority of whom are probably American, putting all that beautiful cash (billions of dollars) into the American economy, AND defying a direct order from the government, and getting away with it.
You don’t have to belong to the Harvard club to want to light up a good cigar and chase it with a good scotch.
While I do not encourage breaking the law, when it comes to tax law, it is ALWAYS good when government gets less and capitalistic companies appropriate their money for what’s best for their company, (which means what’s best for them to continue as a going concern AND return as much capital or value or wealth to their shareholders).
It’s times like these I’m proud to be an American.
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From the NYTimes.com article.
If you’re feeling cynical and want something to b*&^% about, regarding the US government, banks, and their collusive attitude that sticks it to the little guy, this is the article for you.
It’s the story of a woman who lost her job but was making a sincere effort to talk to her bank about her mortgage and work out some payment arrangements so she didn’t default, go into foreclosure or otherwise lose her home.
And what did her bank do in return? They tried to sell her a new mortgage AT A HIGHER RATE, asking her to put MORE MONEY DOWN.
I could comment for days about what’s wrong with this bank’s attitude, but it’s systemic. I doubt I would need both hands to count the banks that would have actually helped this woman in this economic climate.
You can read the article for yourself, and let it turn your stomach on your own.
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The article was so short, I didn’t bother linking it. I copied it (below).
The short article brings up a lot of questions, however. I thought I knew what naked shorting was, but now I wonder. If naked shorting was the problem, which means that hedge funds and others sold stocks they simply didn’t own, and didn’t “borrow” from people who did own them in time (the SEC gives them three days after the sale to make that transaction), then the transaction “defaults.” If all of these stock sales are defaulting, shouldn’t the sellers be facing charges from the SEC, as naked shorting is illegal? If so, are they being processed right now? Is the SEC on the ball here, or are these naked shorts being swept under the rug?
It’s interesting that the article was about two sentences from NASDAQ. Essentially: naked shorting was the problem, don’t worry about it. Well, without an uptick rule and unprosecuted naked shorting, THAT IS the problem. And it could be a problem for any stock anywhere.
The title (referencing the SEC’s decision last year to halt short selling on certain financial stocks) isn’t discussed in the body of the article at all.
What’s going on here?
By REUTERS
WASHINGTON (Reuters) – Data suggests that the U.S. ban on short selling of financial stocks in 2008 did not impact stock prices, the chief executive of exchange operator Nasdaq OMX Group Inc <NDAQ.O> told business leaders on Tuesday.
Chief Executive Robert Greifeld told the U.S. Chamber of Commerce in Washington that a type of short selling, called naked short selling, was the real problem.
Short sellers arrange to borrow shares they consider overvalued in hopes of repaying the loan for less and profiting from the difference. A naked short sale occurs when an investor sells stock that has not yet been borrowed, which can distort markets.
(Reporting by Kim Dixon, editing by Matthew Lewis)
From the NYTimes.com article:
“Carried interest, known as “carry” in the industry, is the share of profits that venture capitalists receive after they successfully cash out of portfolio companies and return money to their investors. It is on top of management fees, which venture capitalists get each year for investing the money.
Carry is now taxed at the capital gains rate of 15 percent. It could potentially be taxed as ordinary income at a rate of 38 percent, said Mark Heesen, president of the National Venture Capital Association, the industry’s lobbying group in Washington.
Mr. Heesen said that carried interest was now under threat because last week, Charles B. Rangel, chairman of the House Committee on Ways & Means, indicated that over the next two months, the committee would look everywhere possible to find money to help pay for health care reform. President Obama’s budget also proposed that carry be taxed as ordinary income.”
and:
“…18 percent of G.D.P. and 1 out of every 10 jobs come from companies that were once venture-backed….”
I use this blog for commentary and criticism of bad monetary policy and stupid spending and other ideas about money, but for the first time, I’ll get on my soap box.
PRESIDENT OBAMA, YOU DO NOT EAT THE SEED CORN.
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From the Yahoo Real Estate article provided by CNNMoney.com:
Nine of the highest are in California. An additional 93 metro areas are at 10% or more.
Not good.
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Me and the kids interviewed and photographed in the June/July issue of BusinessWeek SmallBiz Magazine.
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How do I get added to that list?
The actual SEC press release:
SEC Announces Creation of Investor Advisory Committee
FOR IMMEDIATE RELEASE
2009-126
Washington, D.C., June 3, 2009 — Securities and Exchange Commission Chairman Mary Schapiro today announced the formation of an Investor Advisory Committee to give investors a greater voice in the Commission’s work. SEC Commissioner Luis A. Aguilar will serve as the Commission’s primary sponsor of the Committee.
“Through this well-respected and diverse group, we are reaching out to investors in a new and significant way,” said Chairman Schapiro. “I look forward to hearing their views on new products, trading strategies, fee structures, and the effectiveness of disclosure, among other issues.”
Commissioner Aguilar added, “Investors need a greater voice at the Commission. The Commission’s traditional role as the investor’s advocate, as well as our deliberations, will be enhanced by the range of views the Advisory Committee will provide.”
The Investor Advisory Committee’s charter provides for a broad scope of interest, including:
- Advising the Commission on matters of concern to investors in the securities markets;
- Providing the Commission with investors’ perspectives on current, non-enforcement, regulatory issues; and
- Serving as a source of information and recommendations to the Commission regarding the Commission’s regulatory programs from the point of view of investors.
The Advisory Committee will be co-chaired by Richard (Mac) Hisey, President of AARP Financial Incorporated and AARP Funds, and Hye-Won Choi, Senior Vice President and Head of Corporate Governance for TIAA-CREF. Fred Joseph, President of the North American Securities Administrators Association and Securities Administrator for the State of Colorado, will be an ex officio participant.
The Advisory Committee’s other members will include:
- Mark Anson, President and Executive Director of Investment Services, Nuveen Investments
- Jeff Brown, Senior Vice President, Legislative and Regulatory Affairs, Charles Schwab & Co., Inc.
- Mercer Bullard, Founder and President of Fund Democracy, Inc. and Associate Professor of Law, University of Mississippi Law School
- Stephen Davis, Senior Fellow and Project Director, Yale University School for Management’s Millstein Center for Corporate Governance, and nonexecutive chair of Hermes Equity Ownership Service
- Abe Friedman, Global Head of Corporate Governance and Proxy Voting and Managing Director, Barclays Global Investors
- Mellody Hobson, President of Ariel Capital Management
- Dennis A. Johnson, Managing Director, Shamrock Capital Advisors, Inc.
- Adam Kanzer, Managing Director and General Counsel, Domini Social Investments LLC
- Mark Latham, Director of Proxy Democracy, a nonprofit organization helping individual investors
- Barbara Roper, Director of Investor Protection, Consumer Federation of America
- Dallas Salisbury, President and CEO, Employee Benefit Research Institute
- Kurt Schacht, Managing Director, CFA Institute
- Damon Silvers, Associate General Counsel, AFL-CIO
- Kurt Stocker, Chairman of the Individual Investors Advisory Board of the NYSE
- Ann Yerger, Executive Director, Council of Institutional Investors
The Advisory Committee will begin its work in the next few weeks, after the SEC staff files the Committee’s charter with Congress.
# # #
http://www.sec.gov/news/press/2009/2009-126.htm
From the Fortune article on CNNMoney.com.
Fortunately, I live in Texas, so my cowboy boots have a slight heel to them, which allows me to wade through this heavy stuff.
Let’s not call them lies. Let’s call it spin.
The spin has begun from the FDIC. The FDIC says that they are shelving their legacy loan program (and by extension, the Public-Private Investment Program, or PPIP) because banks raised a bunch of capital and therefore aren’t in dire need of selling their “toxic” assets right away. That is three different kinds of wrong. First of all, one has nothing to do with the other, in fact, they conflict with each other. It’s like saying it rained today, so I don’t have to wash my car. Well, you probably won’t wash your car right after a rain, but that doesn’t mean the rain made your car clean. It still needs washed. After you drive through some puddles today, it’ll probably need washed more than ever.
The “toxic” assets still need sold. Treasury has no plan to do so. The reason is they have no money to do so. TARP went to the car manufacturers, and the PPIP needs a ton of capital (94% of every loan, private capital would only have to post 6%, and they would only be responsible for that 6% in the case of losses) they don’t have.
Even though the FDIC is spinning a cute web here, let’s not have sour grapes. This is a blessing. The PPIP was a dumb idea doomed to failure. It gave us (the taxpayers) all the risk and private capital (billionaire Wall Street financiers) 50% of our upside with no downside risk.
To make matters worse for the PPIP (but better for us), congress got involved. From the article:
“…Treasury was reworking the rules to implement a recently enacted amendment by Sens. Barbara Boxer, D-Calif., and John Ensign, R-Nev. The amendment aims to prevent collusion or conflicts of interest in the legacy loan program.
The Boxer-Ensign amendment ultimately may have caused some big players to back away from PPIP – illustrating what Hal Reichwald, a partner at law firm Manatt, Phelps & Phillips in Los Angeles, calls “the toxic combination of policy and politics.”"
You have not heard it here before, and you may not hear it here again, so hear it now: God Bless Barbara Boxer. She may have saved us a couple trillion dollars in losses (the entire “toxic” asset value has been estimated at $14 Trillion).
What does Treasury do now to clear those “toxic” assets? Don’t worry if you don’t have a clue. Treasury doesn’t either.
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