The Bear Stearns Situation, play by play. May 29, 2008
Posted by baxtersbrother2 in Accounting, Economy, Social Discourse, Tax Policy., US Government, Uncategorized.Tags: Bear Stearns, Federal Reserve, Government Intervention, JPMorganChase, Sub-prime mortgages, Wall Street Journal
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There is a very indepth series of articles from The Wall Street Journal that goes into great detail about the failure and “bailout” of Bear Stearns. The articles paint a picture that is nothing short of breath-taking. The beginning of the article has a vision of a trader, confronting the CEO, Alan Schwartz, and asking “How could this happen to 14,000 employees?” “Look into my eyes, and tell me how how this happened!” This is the 64,000 question.
Many large financial institutions have failed. One, was Drexel Burnham, Lambert, for example. But what makes this interesting is that this is the first time that the Federal Reserve responded.
Bear Stearns had alot of mortgages on their books, mortgages that were defaulting. The risk that Bear Stearns was assuming was great along with the fact that they had a cashflow problem.
Wikipedia explains it well…. As of November 30, 2007 Bear Stearns had notional contract amounts of approximately $13.40 trillion in derivative financial instruments, of which $1.85 trillion were listed futures and option contracts. In addition Bear Stearns was carrying more than $28 billion in ‘level 3′ assets on its books at the end of fiscal 2007 versus a net equity position of only $11.7 billion. During 2007, Bear Stearns had several funds that invested heavily in Sub-prime mortgages, and as the market tanked, the value evaporated. This was noticed in releasing earnings, when it was shown that net profits dropped 61%. Then in November, Bear Stearns wrote down another $1.2 billion. This caused more skepticism of the group, as many other brokerages (faced with their own problems) wanted to not do business with Bear Anymore.
In March, clients were dropping like flies. Cash was disappearing. Bankruptcy was definitely on the table, even though it would decimate the business. Then someone called the Federal Reserve. Then in an act of governmental interaction, the Federal Reserve, in connection with JPMorganChase issued an emergency 28 day loan. 4 days later, Bear Stearns and JPMorganChase agreed to a merger at $2 per share ( which got raised to $10, because of threat of shareholder lawsuits.)
What this blog found interesting was that the Treasury Secretary Henry Paulson was leery. The Wall Street Journal reports that “given the unprecedented level of government intervention in rescuing the troubled firm,& appearing to bailout Wall Street Investors while many were facing foreclosure.
GOT ALL OF THIS…. It is the opinion of this blog that this was a bailout that is unprecedented. The Congress is having a dreadful time regarding the Mortgage crisis, but can scope out a deal over a weekend. It furthers the question of how much governmental intervention is appropriate. There are two schools of thought, one is that Ok, you invested, got over extended, and failed; the second is that this needed to be done, otherwise the economy would have been driven further into recession.
The Bear Stearns situation is a situation that is the sign of the times. The sub-prime and other mortgage crisis not only effected the borrowers whose homes are repossessed, but large institutions as well. However, what is different, is that the government was quick to come to Bear Stearns aid and has been not as quick in coming to those effected by the sub-prime crisis. What is good for one, should be good for the other. Many, Many people lost billions of dollars because of the situation and there is empathy. The true effects will be felt for many years to come.
The Farm Bill and the blog agrees with Robert Novak! May 19, 2008
Posted by baxtersbrother2 in Economy, Election 2008, US Government.Tags: GOP, Robert Novak
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Well, in today’s Chicago Sun-Times, Robert Novak goes into great detail about an issue that has been commented on: The Farm Bill and Farm Subsidies. Sometimes, Robert Novak’s columns can be quite confrontational, but today’s article is different. It sums up quite effectively the reasons why The GOP is in such disarray right now.
A movie of Interest May 17, 2008
Posted by baxtersbrother2 in Economy, Social Discourse.Tags: Netflix, The Credit Card Industry
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Over this weekend, I saw “Maxed out” on Netflix. This is the official description on the Documentary:
Investigating both the personal and the national debt owed by Americans, this thought-provoking documentary explores the staggering financial burden we live with every day and exposes how the contemporary financial industry is set up in ways that can harm unwitting customers. With both sobering facts and black humor, Maxed Out unveils the consequences of our debt addiction, including its contribution to the vanishing of the American middle class.
It is definitely eye opening and sad to see.
Ta Da! Gas has hit $4 a gallon… May 14, 2008
Posted by baxtersbrother2 in Economy, Election 2008, Energy Crisis of 2008, Iraq, Oil Prices, Social Discourse, The press, US Government.Tags: ANWR, Election 2008, Family Values, Federal Gas Tax, Fuel Additives, Gas Prices, Heritage Foundation, NY Times, President Bush, refineries, Rush Limbaugh, Strategic Petroleum Reserve, Wall Street Journal
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In connection with the last post, and what I saw on my way home, I thought that I would blog on an issue that is effecting families everywhere. The high gas prices are effecting food prices and of course discretionary income. This is ridicious to say the least. There are proposals everywhere, and this posting will go thru each proposal.
- Temporarily repeal the federal gas tax. A post on this blog goes into great detail about the case for repealing the Federal Gas Tax.
- Determine what is correct verses what is not. A post, confronts Rush Limbaugh regarding comments today about casting blame.
- Examine the issues regarding refineries. It sounds rational but NO OIL companies put up plans. Where does this blogger comes from it is called put up or shut up. As per an article from Money, that has not happened. Furthermore, it is based upon What the refineries are producing/focusing on. Another article goes into detail regarding this issue. Then further, there is evidence that it is because of refineries failures that drive up the price of gas. Review the NYTimes Article for details. An article from the Reason Foundation goes into detail that plays devils advocate. However, this posting is when Oil was $70 a barrel. Today, Oil Closed at $124 per barrel. The article is 3 years old, so the price of Oil has gone up 15% per year over the last three years or 45% overall.
- Determine fact from Fiction. OK regardless of your views on Global Warming ( It does exist), there are reasons why Gasoline Additives are added in the refining of Gas. Most Plainly, it is so people can not see the air that they breathe. However, it is ironic that every time gas rises, there is an instant call for the removal of ALL Additives from Gas. The additives are a part of an EPA Mandate for the Clean Air Act of 1973. There is a direct article from the Christian Science Monitor that addresses this question directly.
- Demand for Fuel has skyrocketed. If you can walk, do it or combine errands.
- Ok the next point takes some explanation. The Strategic Petroleum Reserve is the largest emergency supply in the world with the current capacity to hold up to 727 million barrels (115,600,000 m³) of crude Oil. As prices were rising dramatically, The US Government was adding to the reserve!! Yes Ladies & Gentleman, the crude that the US consumer is demanding be put into gas, the government is taking and putting into the reserve. So, the Government is actually hurting the consumer by increasing demand, and thus price! It is considered a first line of defense. A whitepaper goes into much more detail regarding this. There is sharp opinions regarding the opening the reserve. Heritage Foundation believes that this would be a mistake. The Christian Science Monitor remains neutral. This bloggers opinion is the same as demonstrated from The Wall Street Journal. Open the damn reserve already!
- My favorite point of debate, INCREASE fuel standards. God I like this one because it is so an issue of personal ego. OK. In the 1990’s we did not give a damn about fuel standards, but now that Energy is a problem, it is priority. If done at once, it may be a complete blow to an already struggling auto industry. If we modify standards, it needs to be done strategically, and would help better the auto industry.
- Open ANWR. Oh this is my favorite globally. There has been something so hotly debated, but little known. The environmentalist believe that this would be a global disgrace. People who believe in drilling do not see an issue. However, this has been an issue since 1980!!! There has been one report that says that there is oil there. Other than that, it would be a crapshoot. There are new technologies however, that make oil drilling more intrusive. President Bush and Senator Kay Bailey Hutchinson have been long advocates of drilling. There is a website that is very well put together that is very Pro-Drill. Other sites, suggests the contrary. MSNBC has an article that indicates, that there will be little impact. However, as a person who appreciates the outdoors, I would hate for the environment to be destroyed.
We need leadership and actual solutions. If we can not have our leaders be accountable, then we need to elect others that are.
The Daily Polls & the need for a dialogue. May 14, 2008
Posted by baxtersbrother2 in Economy, Election 2008, Social Discourse, The press.Tags: Clinton, CNN, LA Times, McCain, Obama, Polls, USA Today
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For many political junkies, we are intrigued by polls. But today, the polls that have been produced are startling.
First, the most political, 28% of those polled approve of the job performance of President Bush, 71% disapprove, from CNN
Second, an LA Times Bloomberg poll, that indicates that 78% of those polled believe that the nation is in recession.
Third, from the LATimes, 77% believe that the nation is on the wrong track.
However, 4th comparing the Democratic Candidates for President, 46% want Obama, 45% for Clinton.
5th, if there was a matchup between Obama and McCain, Obama would dominate, 47% to 44%.
There are clear indicators that the country is having struggles. That is apparent when you visit the Gas Station, the local Safeway, or talk with friends. Labeling a presidency a complete failure as in a USA Today Poll by 69% of those polled is not happening.
We need to be resilient, dynamic and realize that we can do better. WE not the politicians need to step up.
Student Loans should not be a target for a government takeover! May 8, 2008
Posted by baxtersbrother2 in Accounting, Economy, Election 2008, Social Discourse, US Government.Tags: Government Regulation, NYTimes, Student Loans
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There is an editorial in The New York Times regarding the student loan issue. Student Loans are a huge issue, but a government takeover of the student loan industry is NOT the answer. The nation is investing in the future, not trying to get rich off of loans. There needs to be better education regarding what the borrower is agreeing to and money needs to be freely available to invest in the future. An educated workforce empowers the nation. The third party lender is one that handles the administrative functions of the loan. They loan the money, but it is guaranteed against default by the government! It would be in the lenders best interest to invest in the future because they will be hiring those individuals in the future as well as lending money to those individuals.
Dumb as we wanna be is just that—Dumb April 30, 2008
Posted by baxtersbrother2 in Economy, Election 2008, Fiscal, Resources, Social Discourse, The press, US Government.Tags: , Economy, Energy Policy, Friedman, Gas Taxes, Housing Crisis, NYTimes
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Thomas Friedman gets it completely wrong in his article Dumb as We Wanna Be, in Today’s NY Times. The NY Times Reporter, typical pandering to people and talking down to others, illustrates how he completely misunderstands the McCain and Clinton proposal to suspend the Federal Gas Tax of 18.4 cents per gallon. Obviously he is not concerned with making ends meet and pandering to the public. The average family of a husband, wife and children. Each Husband and Wife have a car that contains a 16 gallon tank, and fill up twice a week for the simple pleasure of going to work and activities with their children. Simple Math if you are filling up a 16 gallon tank twice a week for 2 cars, that is 64 gallons of gas that is consumed per week, or 256 gallons per month. 256 gallons multiplied by 18.4 cents per gallon is $48 per month. That may sound small to a highly paid columnist like Mr Friedman, but to the average American family, it may be the difference between being in and not being in default.
He illustrates that Government is fighting over renewables, which I support renewable forms of energy. However, he panders and talks that the leadership “refused to get all the adults together in a room and work out a compromise.” First of All, that is condescending, but this is an election year and few key pieces of legislation are typically completed. He illustrated that other nations are getting involved and making the investment, but their economy’s have not had the dramatic impact of the housing crisis. Then he ties it together & indicates that 100,000 new jobs would be created. Not necessarily true and sounds like campaign spin. Until you really know, and understand if our people have the skills necessary, can you make that assumption.
Barack Obama’s Bitterness on an overall spectrum April 15, 2008
Posted by baxtersbrother2 in Economy, Election 2008, Fiscal, Just Ranting, Resources, Social Discourse, Tax Policy..Tags: , , Barack Obama, Economy, Election 2008, Fiscal
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Well, it was bound to happen eventually, Barack Obama officially fumbled and was off message last week when he indicated that “It’s not surprising then they get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or antitrade sentiment as a way to explain their frustrations” during an event in San Francisco. In today’s NYTimes, one of their columnist indicates there is racial undertones present. Personally, I believe that it is more simpler than that. Many, Many Americans are finding it difficult in challanging economic times not to be angry. There was a poll that was conducted that 81% of the American electorate believes that the nation is in the wrong direction. Everyone is talking about how much gasoline has increased, how much food prices have increased, how much utilities have increased. They see their investments deflating, jobs being offsourced. They see their friends going thru the same thing. This is not believe that it is a “working class” thing but what is present regardless of socioeconomic status.
Lou Dobbs, on his nightly program, states that there is “A War on the Middle Class.” I partly agree. People are frustrated and wanted to just know why. Questions of “Why is this happening to me?” And, they want someone/something to blame, whether it be the Government, illegal immigration, or trade policies.
Barack Obama was politically stupid to make this statement because it appears that he is completely out of touch with the American electorate. Plus, he is apparently out of touch. Americans are NOT domestic simpletons that cling to God and Guns. They need leadership and resolve.
There has been a comment that has been all OVER the place yesterday. The phrase of “elitist” was prevelant. There were many that believe that Barack Obama, by making the stupid comments, is an elitist. However, America, do not buy it. This is a divide and conquer strategy used to distract people from the real issues. The GOP has to present a solution that is different than what they have produced thru the leadership of President Bush. They haven’t. The Democratic Party needs to present something that will captivate and motivate. They have not. Instead, we have stories about Pastors and some of the comments that they present, the “pimping” (Now this was stupid) of Chelsea Clinton, and so forth. What I would like to know is what are these people going to do or not do to change the quality of life of the American people and if those solutions simply do not work, then change them to a more libertarian approach.
Happy Tax Day everyone!!! Most have probably spent their refunds to survive. But, nonetheless, Happy Tax Day. I have also included the schedule of when people get their “economic stimulus” checks.This is the infamous Bi-Partisan “Economic Stimulus Act of 2008.” The interesting thing is that this does not truly impact the economy. This is not “free money.” This is an advance on your refund for when you file the 2008 return, and the bad part of all of this: IT IS PURE DEFICIT SPENDING. Many of us, will take the funds when they see it online in their accounts, go over to the billpay section of their banks website and pay something. In the act, there were some investment credits, but not enough to make a difference. It is exactly the same in theory as the Stimulus Acts that were done in 2001, and 1975. The net impact was that there was minor, if any stimulus to the economy.
Now this is just getting out of touch. April 1, 2008
Posted by baxtersbrother2 in Economy, Election 2008, Fiscal, Uncategorized.add a comment
Either the economy is doing lousy or great but a “Media Myth” is really stretching it. Read the article. This is bordering on the line of senility and out of touch. There are alot of homes being foreclosed on, it is harder and harder for families to make ends meet when faced with $4 dollar fuel costs ( In Chicago, it is $3.799). Why blame the media? That is ridicious. We are taking and making excuses for bad decisions and it is a common pattern. More and More, there is indication that people that are just out of touch with reality.
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