Fec, writing about the sustainibility movement, provides the quote of the day:
If climate change is a fact, and I believe it probably is, then we need to do something about it. However, clean coal, carbon capture and offsets are myths. Before we begin to indoctrinate society, I’d just like some agreed upon methodologies, rather than the hocus pocus money grab going on now.
As part of a post about the economy Mark Cuban makes a very interesting point about differentiating between investors and traders/speculators:
Our government doesn’t know the difference between an investor and a speculator or trader. If we did, we would understand that we should tax the trader/speculator more heavily than the investor.
The investor allows entrepreneurs access to capital and allows them to work with it and build businesses, which in turn build employment and do great things for the economy. The trader/speculator pushes companies to make more money now rather than invest in doing the right thing for the company. The trader/speculator dominates the stock market today, which in turn puts pressure on public company CEOs to cut jobs and play games with their financials in order to give the appearance of stability in a far from stable market. The investor understands the bigger picture and is ok if profits fall for several quarters or even several years as long as the company will maximize its return over the long run.
The government should raises taxes significantly on profits from short term capital gains on the sale of public stocks, indexes, commodities, futures held for 24 hours or less and extend the length of time required to qualify for Long Term capital gains and reduce the tax rate on Long Term gains. This will discourage flash trading, ETFs that move markets purely on cash inflows rather than fundamentals and also reduce the amount of speculation on commodities. It will also reward companies that act in the financial interests of long term holders and their employers. I think the impact on the economy would be far fewer layoffs as CEOs find themselves with more shareholders who think long term rather than short term. Believe it or not, there are shareholders who are fine with companies not beating their numbers if the company is making progress towards a clearly defined goal. I don’t care if the P/E of the stocks I own is 14 or 20. I want the companies investing in being a great company rather than trying to make traders of their stock happy. Most CEOs give great lipservice to this approach, but they are so focused on marking to market their own personal stock portfolios, they emphasize stock performance over doing the right thing for the company. Taxation can change the focus on public companies and stock trading. That would be a great thing for the economy.
Lex Alexander has a post about the fiasco that is the VA disability program right now. He points out that while the VA health care system is a good one, the VA disability system is in disarray and he provides some startling numbers to back up that assertion. It seems to be particularly bad here in the Winston-Salem area. From his post:
First, it takes too long even for straightforward claims to be processed. As of a week ago today, the claim backlog stood at more than 422,000 cases nationally, up about 30,000 from a year ago. (Winston-Salem’s regional VA office, with a backlog of more than 21,000, had more cases pending than any other regional office in the country except St. Petersburg, Fla.) Nationally, more than 20 percent of cases had been pending for six months or more.
Lex later quotes Abraham Lincoln and I think the quote says it all:
As the Civil War was ending, Abraham Lincoln called on America in his second Inaugural Address to “care for him who shall have borne the battle and for his widow and his orphan.” For the vets (and in some cases, their survivors) who depend on these payments, we need to do a better job.
I'm not sure if this made the local news and I just missed it, or if it's been flying under the radar, but there's a program in Winston-Salem and Forsyth County to help folks buy foreclosed properties. Back in January I got an email from Sen. Burr's office about North Carolina receiving over $52 million for the Neighborhood Stabilization Program, but didn't really hear much after that. Then today the following item from FindForeclosureProperties.com (nice URL huh?) showed up in my Google Reader:
Housing officials in Forsyth County and Winston-Salem, North Carolina have partnered with the Center for Homeownership and financial institutions to help eligible buyers purchase bank foreclosures for sale for less than the properties’ appraised value.
Under the Neighborhood Stabilization Program (NSP), eligible homebuyers will be able to receive a maximum of $20,000 as deferred forgivable loan. The funds will be used by the eligible buyer as down payment for buying foreclosure houses, provided that the mortgage holders are willing to sell the properties for less than their assessed value…
Furthermore, the home buying assistance initiative is open to first time property buyers and families or individuals who have not purchased or owned a house for three years.
Eligible borrowers will not be required to pay back the loan under the NSP program if they opt to stay and live in the property for not less than 20 years. Additionally, homebuyers should have the properties under sales contract on or before July 18, 2010 in order to become eligible for the program.
Prospective buyers should have household earnings of equal to or not more than Forsyth County’s 120 percent median income which for a four-member family is $71,640. The median income restriction varies with the family size.
I'm not sold on this being a good idea. Will this prompt people who may not be financially ready to buy a house and then, a year or two down the road, be in over their heads and threatened with foreclosure themselves? Normally you might say that the banks wouldn't lend to risky buyers, but given what we've learned over the last two years do we really want to trust the banks with their own due diligence?
I appreciate what the program is aiming to do, but like I said I'm not sold on it's merits.
Here's the link to the county's page dedicated to the NSP.
So one of my employees and her husband just closed on their first house last night, but only after their mortgage company put them through the ringer on Monday and Tuesday. They'd submitted all their paperwork in early July and had been assured that everything was in order. On Monday they called just to make sure everything was cool and that's when the mortgage company pulled the "well we don't have everything we need from you" routine even though everything had been submitted and receipt had been confirmed weeks earlier.
One of the things that the mortgage company said was missing was verification of my employee's employment so she gave them my direct number and they said they would call right away. That was mid-day on Monday and by five they hadn't called so she called back and the woman she was dealing with said that she'd talked to me and everything was okay. In other words the mortgage company's rep lied or had a conversation in her head that she confused with a phone call to me.
Cut to this morning. I received a call from the mortgage company to confirm my employee's employment. Like I said, they closed last night so really the horse was out of the barn. I guess if she had lied the mortgage company could have taken possession of the house as a recourse, but I can't imagine there are many banks out there that would want to take possession of another house in this day and age.
Sheesh.
This has been an interesting week. I spent a couple of days in Raleigh for the day job and had my first opportunity to get a first hand look at the NC legislature in action. Here's my takeaways from the experience:
The other thing that made this week interesting was the hometown drama known as the downtown baseball stadium. While I could probably write dozens of pages of thoughts on the whole situation, I'd rather just ask the leaders of Winston-Salem some questions:
Seriously, the city's leadership couldn't have tried to make this deal look any worse. I'm really not sure what the motivation could have been to handle it this way, but whatever it was I can't imagine that it balances out the negative taste that this left in the public's mouth. Put it this way: Mayor Joines and the city council spent a whole lot of their political capital to get this done and while they were going to take a hit no matter how they handled this, I think they at least doubled the damage by handling it in the manner that they did. It will be interesting to see what happens with the next economic development deal that comes along.
So a report by the Mortgage Bankers Association says that the number of mortgage applications plummeted thanks to a large jump in interest rates. Sounds bad when you equate economic recovery with housing starts, but on the other hand if you look at where the interest rates ended up, 5.25% for a 30-year fixed mortgage, and if you're old enough to remember interest rates that were double figures, you find it hard to exclaim, "Holy crap that's a high rate!" I can still remember my Mom being happy about her 13%-ish interest rate back in the late 70s or early 80s. After all just a few years earlier rates were closer to 20%. Don't believe me? Check out this table of prime interest rates since 1947 and pay particular attention to the jump in rates from October, 1980 to December, 1980, from 13.5% to 21.5%. Ouch.
Truliant Federal Credit Union surveyed its members to see how the recession has affected their behavior and over 3,000 shared their thoughts. Some of the results are highlighted in this press release. Anyone who's seen all the restaurants shuttered recently won't be surprised by this one:
Q: If you have cut back on spending, what areas are most affected?
73% – Dining Out
70% – Entertainment
64% – Travel, vacations
59% – Clothing
55% – Home Electronics
45% – Auto (buying/leasing a new vehicle, repairs)
35% – Home Appliances
22% – Cell Phones and/or calling plans
5% – Other
From the “other” category, popular items that were mentioned include groceries, medications, food and club memberships. Another trend that the “other” category highlighted is that more of Truliant’s member-owners are starting to purchase generic products to help them save money.
Ed Cone points to an article on the front page of the Washington Post that highlights the dire straits that many (25%) of North Carolinians are in with health care. Literally 1/4 of all adult North Carolinians, or 1.8 million people, are living without health insurance and an additional 9% are underinsured.
Health insurance has become exorbitantly expensive. Insurance companies continue to raise premiums while at the same time reducing benefits. They can do this with impunity because they know that policy holders have no other choice but to pay what they demand, or choose to go without coverage. They also refuse to increase payments for services, continuing to pocket the growing difference. More and more people are taking the gamble and choosing to go without coverage.
I can tell you from our family's perspective it's hard to argue with him. When we're spending over $8,000 a year on premiums alone, and we're doing pretty well compared to other families we've talked to, then you know there's something out of whack with the system. It's also easy to understand how so many people end up having to live without insurance in the first place.
The Boston Globe has an interview with Elizabeth Warren, the chair of the Congressional Oversight Panel that is overseeing the bailout of America's financial system (thanks to Lex for the pointer). It's a pretty quick read and if you're at all interested in what's going on with your trillions of dollars in taxpayer subsidies to the financial muckety-mucks then I suggest you read it. Here's the end of the interview, which I think gives you an idea of the stakes:
Q: Is there anything else that you would want people to understand?
A: I don't have a badge and a gun. The power of this panel is derived entirely from the voice of the American people. If they stay out of the policy debates, then Treasury can spend at will and reshape the American economy with no one in the room but insiders. If they are involved, the policies will look different.
It's the design of the rules going forward that will tell us or that will determine whether we are moving to a cyclical economy with high wealth, high risk, and crashes every 10 to 15 years. Or whether we will emerge, as we did following the new regulatory reforms in the Great Depression, with a more stable economic system that benefits people across the economic spectrum. It's an amazing moment in history.
Befuddled 