Raising FDIC Insurance … Why Temporary?

The latest minor fix for the economy since the so-called “bailout” didn’t pass is to “temporarily” raise the upper limit on FDIC insurance to $250,000.

In 1980, the limit on FDIC insurance was raised to $100,000 from $40,000 where it had been set in 1974. That probably was an accurate reflection of the change in the value of the dollar between those years which was initiated by the Arab Oil Embargo of 1973.

Does anyone believe that $100,000 today has the same value as $100,000 in 1980? Is the price of a house, car or loaf of bread the same as it was in 1980? Is the price of a ticket to go to a movie the same as 1980 or the price of a bag of popcorn?

The simple answer is “NO”.

The primary reason for raising the FDIC limit is to re-instill confidence in the banking system. If it’s necessary to “re-instill” confidence in the banking system then that means there has been a false sense of security for a very long time.

When the FDIC was originally established the limit was set at $10,000 in the 1930’s. I don’t think anyone believes that $100,000 will buy today what $10,000 would buy in 1935. This is just another place where the banking system has been “cheaping out” on their depositors and it’s time for another “permanent” corrective action which is long overdue.

So … why temporary?

It has been nearly 30 years, hasn’t it?


McCain and the SEC: On CNBC- “Where Were the Regulators?”

He was called reactionary a while back when he called for the firing of SEC head, Chris Cox.

Well, today an Inspector General’s report says that the SEC under Chris Cox has been derelict in its duty failing to provide adequate oversight of investment banks.

The IG report was reported on by Scott Cohn on CNBC today. Watch the following video on CNBC:

http://www.cnbc.com/id/15840232?video=868666144 (cut and paste) or go to the following site:

Video – CNBC.com “Where Were the Regulators?”

It appears that the reactionary John McCain might have been right on the money in demanding the firing of the SEC chairman.

Maybe Chris Cox will just do everyone a favor and simply resign. It appears obvious that, in some way, he might not have been doing his job. There’s nothing like being “a day late and a dollar short” … or $700 billion short … or a $1 trillion short.

Now he’s calling for scrapping the voluntary regulation program for the investment banks … and the meltdown has been going on for how long … nearly 11 months?

Thank You, Barney Frank, for the Mess We’re In

Most people haven’t gone so far as to directly blame him, close but not quite, but I will. And we can throw in a few other prominent Democrats like Chris Dodd and Chcuk Schumer as well if you like. If there was ever any one person who deserved to have about 300 million people attend his tar and feathering party, it’s Representative Barney Frank of Massachusetts.

If you don’t want to take my word for it, then read the following article by Michael Graham of the Boston Herald.

Better not bank on Barney Frank – BostonHerald.com

Haven’t we been repeatedly hearing how the Republicans and the Bush Administration created this whole mess because they’re in favor of deregulation. And, John McCain is a deregulator so he, in particular is responsible.

Well …

From the standpoint of Fannie Mae and Freddie Mac, nothing could be farther from the truth. Okay, let me be a little more blunt. They are blatant liars, every one of them … including Barack Obama and all of his puppet like mouths such as Bill Burton and more recently, Stephanie Cutter. These people couldn’t recognize the truth if it hit them in the face.

The truth is …

The Bush Administration as early as 2001 … that’s right … within less than a year in office … recognized that there were serious problems with Fannie Mae and Freddie Mac and sent John Snow who was the Secretary of the Treasury to Congress to try to get laws passed to increase regulation of Fannie Mae and Freddie Mac. The Democrats wouldn’t hear of it. The Bush Administration sent Alan Greenspan to Capitol Hill but, again, the Democrats wouldn’t listen.

I watched a tape yesterday where Barney Frank said in one of those hearings that the warnings of crises that were being presented were only “hypothetical” and would “never happen”. That’s right. that’s exactly what Barney Frank said … what we’ve been going through the past year and right now would not happen.

In 2005, the Republican passed a bill in committee to increase regulations of Fannie Mae and Freddie Mac which was voted against to the man by the Democratic members. The bill wasn’t put on the floor for a vote because the Republicans knew they couldn’t get 60 votes to pass the bill.

Barney Frank has consistently favored Fannie Mae and Freddie Mac forcing banks and other lending institutions to underwrite loans for people who couldn’t afford them.

Now the taxpayers are having to bail out the corporations that bought these bad loans …

and the Democrats wants the American Taxpayer to pay for the same people who shouldn’t have had the loans in the first place to keep the property that they couldn’t afford in the first place.

That’s the real screw job … not the $700 billion bail out. If it were only the $700 billion bail out American Taxpayers could probably wind up making money on the deal in the long run because the property could probably be sold later at a profit. But, no. We have to pay to keep the people who couldn’t afford the houses in the first place in them.

That’s the real shaft that the American public is getting.

Of course, there’s one more card in the deck. All of this property could be sold at a profit later. My bet is that it will be sold for pennies on the dollar to some special friends of a few special people … (Democrats, of course, since they’re counting on controlling both Congress and the White House after November) … and the American taxpayer and public will be shafted anyway.

Thanks, Barney … and Barack and Chris and Chuck. Yeah … thanks.

26 September 2008 …

I’ve read some people trying to debunk my article by saying that the Republicans controlled Congress and could have passed any bill they wanted to. Those people obviously don’t know what they’re talking about or don’t understand how the Senate works.

A look at the following article on the History of the U.S. Senate,

U.S. Senate: Art & History Home > Origins & Development > Party Division

clearly shows that the Republicans never had a veto proof majority of 60 to pass legislation over the threat of a filibuster. There were never more than 55 Republican Senators in a given Congress during this period and then only that many in two Congresses.

A simple majority is not veto proof control.

So, let the critics try to debunk fact.

Addendum (2/21/2009): The Boston Herald article is no longer available for free access as I found out today … but the comments are. I suppose if you want to read the article you’ll have to subscribe … although I did a search of the title and got “0” results. ???  “Earl”

Bill Burton Says Obama can “Walk and Chew Gum”

He also said “politics should be put aside” … as he tried to make points to slam Senator McCain again and again. Hummmmmm …

Like Stephanie Cutter who appeared on Fox News this morning just before him, he adroitly managed to get all of his ten or twelve talking points in essentially within one sentence. It was nothing short of amazing.

As they both pointed out, Senator Obama can multitask. He can handle more than one thing at a time. Apparently, Senator Obama is one of those people who can perform open heart surgery while playing golf.

But he’s in daily contact with Nancy Pelosi, Harry Reid and Secretary Paulson. I’m sure the patient would be reassured when his surgeon calls the hospital everyday to see how the patient is doing rather than coming in to see him.

Do you get my point. It’s called setting priorities and doing your job. It has nothing to do with being able to do more than one thing at a time. Sometimes the patient wants to feel like he has the complete attention of his doctor., that his physician is giving him his full attention and not talking to everyone in the room after he asks the patient how the patient is doing.

Isn’t Senator Obama still Senator Obama?

Meanwhile Harry Reid and Nancy Pelosi treat John McCain like he’s the janitor in the men’s room at the Congressional office building rather than one of their colleagues. That’s probably wrong. They probably treat the janitor with more respect.

If there’s one thing I intensely dislike it’s arrogance and snobbery.

It seems that Senator Reid and Representative Pelosi are confusing Senator McCain with Senator Obama They’re apparently used to Senator Obama not having any input or actually doing his job.

It’s also fairly obvious that Senator Obama is extremely experienced in doing nothing substantive while allowing others to do the work and then taking credit for their efforts as Senator Obama has repeatedly shown by his campaign statements and previous actions in the Illinois legislature.

Was John McCain Right About Wanting to Fire SEC Chairman Cox?

A short time ago, John McCain said the chairman of the SEC (Securities and Exchange Commission), Chris Cox, should be fired. For making this statement many ridiculed McCain for being reactionary and hot headed.

Supporters of Chairman Cox have pointed out that the chair of the SEC has limited regulatory powers and hasn’t had the authority to regulate many of the activities which have brought on the current financial crisis.

On Fox News this afternoon some accounting experts pointed out some information that would indicate otherwise.

According to them, a simple change in accounting requirements which the chairman of the SEC does have the authority to effect might have averted the current crisis.

Let me see if I can explain this correctly.

Current accounting regulations require that the mortgage packages have to be valued at what they would sell in the current market. This would value the mortgage packages at whatever they would sell for even under the worst conditions which these instututions currently face. This has caused a continuing downward spiral in the value of all the loan packages as if they all had to be sold today … at current market prices … as if they all had to be sold at a fire sale, regardless of whether the mortgages in the packages were being properly serviced by current home owners.

In other words, the mortgages of the 95% of the people who are actually making regular payments on their loans are being treated as having the same value of the loans of the less than 5% who have defaulted on their loans.

How does this affect the credit market? As the values of the loan portfolios have contracted because they all have to be valued as if they had to be sold today or were all literally worth nothing, this has caused a contraction on the perceived value of the bank’s assets which in turn has caused a contraction in the amount of credit a bank can extend.

In other words, a bank can only loan a multiple of its assets. The example given was a bank being able to make loans valued at 10 times its assets. If the assets are forced through accounting rules to be devalued from $100 billion to $10 billion, then the credit a bank can extend decreases correspondingly.

What does all of the have to do with the chairman of the SEC. Apparently, he has the authority to change the accounting rules so that the banking or investment institutions could change how they value their assets … say to fair market value or some other standard. One mentioned was basing the mortgages on current rental or mortgage payment income.

Let’s face it, we aren’t paying our property taxes based on the value of a forced sale of our homes. We all know if we had to sell our homes today we’d take a beating and only receive a fraction of its true worth.

Imagine the effect on cities, counties and state governments if they had to change their property assessments to the worst case value of the properties within their jurisdictions.

Well, that’s exactly what’s being done to the investment banks and commercial banks.

And, apparently, the chairman of the SEC has the authority to change that. It appears that if he had, that action might have been one of the things that could have been done to avert the current crisis.

Maybe, John McCain was right to recommend firing Chris Cox.

Another Thought on Pelosi’s Energy Bill

I’ll probably think up a number of other reasons to feel like I’ve just visited a proctologist when considering Nancy Pelosi’s Energy Bill, but this one is almost one hemorrhoid too many.

By setting the drilling limits at 50 to 100 miles, the House Democrats under the unflinching wisdom of Nancy Pelosi have virtually guaranteed the Republic of China exclusive drilling rights in the Florida Straits, that is of course, unless Exxon Mobil, Chevron and Conoco want to go begging to Hugo Chavez’ mentor, Fidel Castro,  or his brother Raul, for permission.

Oops, then that would make it a foreign source again, wouldn’t it?

And don’t forget about that postage stamp sized footprint that would only be required in ANWR to tap the oil and gas in millions of acres of Alaska. Using this analogy, China can put in a well within the Cuban side of the Straits and, with a little horizontal drilling get oil from … where?

Off Miami or Naples … or how about from right under Disney World?

Thanks Nancy. Why is it every time I think of you I feel like my house has been robbed?

Pelosi House Passes Offshore Drilling Bill With 50 Mile Limit. What About Wind?

In response to an overwhelming public outcry for Congress to move on offshore drilling to relieve our nation’s dependence on foreign oil, the Pelosi controlled House of Representatives passed a bill to be sent to the Senate for consideration which limits offshore drilling to a 50 to 100 mile offshore range.

TheHill.com – House passes energy bill

NRDC: Press Release – House Energy Bill Falls Short

House “energy bill” is a sham

Opponents to the bill argue that most of the projected offshore oil deposits lie within the 50 mile range and the Democrats under Pelosi’s leadership are simply trying to delude the public into thinking the Democrats support offshore drilling while approving areas for drilling which will provide little stimulus for companies involved in oil exploration to bid on the approved sites.

My question is whether the Democrats and Pelosi, in particular, have inadvertently shot themselves in the foot. While inherently opposing oil exploration or new development of nuclear energy, the mainstay of the Obama Campaign has been to achieve energy independence from foreign energy sources within 10 years. While shunning the use of fossil fuels and nuclear energy, the mainstay of the Obama strategy would be the use of renewable sources. Unless they plan to heavily compete with food supplies and therefore further drive up the price of food in the markets, the mainstay of Obama’s plan will need to be solar and wind energy.

If this were a practical consideration, the wind corridor in the Midwest isn’t sufficient to generate more than probably 20% of the nation’s energy needs at the most. That means, for wind energy to be a viable consideration, offshore wind power will need to be a major component in that project.

As noted in a previous article, Pickens Plan Presentation Before Senate Committee, Dr. Habib Dagher , director of the Advance Structure and Composites Laboratory at the University of Maine, stated that the technology for producing significant offshore wind power in waters beyond 20 miles offshore will take about 5 to 7 years to develop … which doesn’t include mass production of the developed technology or its implementation.

The 20 mile limit is the “over the horizon” number chosen in consideration for people like Senator Edward Kennedy who don’t want to see wind turbines from their beach front properties.

Since 20 miles offshore is considered over the horizon, it brings into question why Pelosi and the Democrats chose to limit offshore drilling to between 50 and 100 miles offshore.

It also brings into question how the Democrats will handle the deployment of wind turbines offshore, whether they will stick to 50 mile minimum on wind turbines as they have set for oil drilling and, if not, why?