Monday, October 18, 2010

Bankers: How Low Can You Go

The roll of a bank in our economic system is to be a safe depository for their customers’ monies in return for business and consumer loans (car, home, etc.). A bank is to make its’ profits from the difference earned on loan interest and the interest paid on their deposits. Beginning in 1980’s, these profits were not enough, banks saw other investment houses earning huge profits off new investments so they thought it was their turn to earn these profits. The problem is that bankers’ are not that smart. From the Savings & Loan debacle of the 1980’s, to deregulation under Bill Clinton in the 1990’s, to the look the other way administration of George Bush in the 2000’s, banks have developed a keen eye for unethical and fraudulent behavior. By creating securities off mortgages they never really should have loaned out to risky borrowers they have lost billions of dollars, of which has now been paid back by American citizens (taxpayers).

Today we now learn that the process by which bankers are foreclosing on the properties that they never should have financed is flawed by mismanagement. When will it end! It reminds me of an organization in the process of hiring a new President, only a select few can participate in the process but it is the whole organization that will suffer should the process select an incompetent leader. Commercial banks generated huge profits at very high risk with only a select few prospering and when this process collapsed it is the entire American taxpayers who pick up the tab for their unethical behavior. Where has accountability gone in our culture!

If you are interested in this please see the movie “The Inside Job”.

Speaking of the American taxpayer, ever wonder where your taxes go – here is an example from 2009:JUST HOW BAD IS THE HOUSING MARKET? - We offer some equally grim analysis from Laurie Goodman of Amherst Mortgage Insight suggesting that if the government does not step in with another (much more effective) modification program, one in 5 borrowers will lose their homes, which would be both politically and economically cataclysmic.

From Goodman's report: "The bottom line: 20 out of every 100 US 1st Lien Residential Mortgages are already impaired. 9 are seriously behind in their payments. 6 have been behind and are now 'Dirty Current' - these loans are re-defaulting at an eye-popping rate of 50% per annum. 5 are Underwater by more than 20% of current value and are defaulting at a 20% per annum pace."

JUST HOW BAD IS THE JOB MARKET? - ADP reports that private sector employers cut 39,000 jobs in September, much worse than expected. Couple that with grim housing data and you have a recipe for two things: Bad election results for Democrats (despite the usual late-cycle "tightening" in the polls) and almost certain action by the Federal Reserve in November to follow Japan's lead and plunge into serious quantitative easing. The Fed, in turn, is probably the Obama administration's only hope to juice the economy heading toward the reelection campaign because there will likely be no agreement on stimulus spending or serious tax cuts on Capitol Hill come January.

BIRTHDAYS THIS WEEK – Birthday wishes and thoughts this week to Chuck Berry (84), Willie Horton (68), Huell Howser (65), Kim Kardashian (30), Kevin Kline (63), Wynton Marsalis (49), Tom Petty (60), Lindsey Vonn (26).

COLLEGE FOOTBALL PICK OF THE WEEK – Saturday 10/23, the key college match up this weekend is between two Tigers; #6 (7-0) LSU @ #4 (7-0) Auburn, 3:30 PM ET, CBS. No one is hiding behind confidentiality in this big game, Auburn is favored by 4.5 points, give the points and take Auburn to win big. Season to date (6-1).

SMALL COLLEGE PICK OF THE WEEK – Saturday 10/23, a key Empire 8 conference match up this weekend: #18 (7-0) St. John Fisher Cardinals @ #19 (5-1) Alfred Saxons, 1:00 PM ET, HGTV. The winner of this game will be a likely E8 conference winner and on to the D-III playoffs. Take the Cardinals to win big on the road in western New York. Season to date (5-1).

NFL PICK OF THE WEEK – Sunday 10/24, The Swami’s troubles continue in the NFL this season. This week the New England Patriots (4-1) head to one of the best cities in America, San Diego to take on the Chargers (2-4), 4:15 PM ET, CBS. Norv Turner is in his last days as a head coach, San Diego is favored by 2.0 (no way), take the points and the Pats. Season to date (1-5).

The woman applying for a job in a Florida lemon grove seemed to be far too qualified for the job. The foreman frowned and said, "I have to ask you this: "Have you had any actual experience in picking lemons?" "Well, as a matter of fact, I have!" "I've been divorced three times, owned 2 Chryslers, and I voted for Obama." Thank you KG of NYC.

2,000 feet below the surface and we are watching LIVE the rescue of the miners, BUT I get no Blackberry signal in certain parts of Claremont AND my cable is always down…go figure.

WORDS OF THE MONTHfulsome \FUL-sum\, adjective: offensive to the taste or sensibilities. “The search committee’s visit with the employees proved nothing but fulsome flattery.”

desarrollar, verb: to develop; to take place. “La manifestación se desarrolló sin incidentes.”

SPORTS BLINK – The Bonita High School Bearcats continue to power through their football schedule (6-0). This week the Walnut High School Mustangs venture into Glenn Davis Field Friday October 22 @ 7:00 PM PT. Please support your local team wherever you live.

Next week, Rink Rats election 2010 picks, our monthly Finance comments and of course the Jack Ass of the month.

Until next Monday, Adios.

Claremont, CA
October 18, 2010

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