Obamanomics vs. Reaganomics: Destroying the lies about trickle …

dancingczars.wordpress.com2/7/12

This entry was posted in Obamanomics vs. Reaganomics: Destroying the lies about trickle down economics and tagged conservative blog netowrk, Progressives are economic morons, Socialism doesn't, Trickle down works.

Another Record for Obamanomics | Wizbang

wizbangblog.com2/3/12

Another Record for Obamanomics. February 3, 2012 | Filed under Economics,Employment | Posted by Rodney Graves. And like all such records, it's not one that's doing the nation a damn bit of good.

President Obama has frequently justified his policies and judged their outcomes in terms of equity, justice and fairness.

All of which begs an obvious question,

How does our existing system and his own policy record stack up according to those criteria?

1) Is it fair that the richest 1% of Americans pay nearly 40% of all federal income taxes, and the richest 10% pay two-thirds of the tax?

2) Is it fair that the richest 10% of Americans shoulder a higher share of their country’s income tax burden than do the richest 10% in every other industrialized nation, including socialist Sweden?

3) Is it fair that American corporations pay the highest statutory corporate tax rate of all other industrialized nations but Japan, which cuts its rate on April 1?

4) Is it fair that President Obama sends his two daughters to elite private schools that are safer, better-run, and produce higher test scores than public schools in Washington, D.C. while millions of other families across America are denied that free choice and are forced to send their kids to second-rate schools?

5) Is it fair that Americans who build a family business, hire workers, reinvest and save their money—paying a lifetime of federal, state and local taxes often climbing into the millions of dollars must then pay an additional estate tax of 35% (and up to 55% when the law changes next year) when they die, rather than passing that money onto their loved ones?

6) Is it fair that Treasury Secretary Tim Geithner, former Democratic Senate Majority Leader Tom Daschle, former Ways and Means Chairman Charlie Rangel and other leading Democrats who preach tax fairness underpaid their own taxes?

7) Is it fair that after the first three years of Obamanomics that the poor are poorer, that the poverty rate is rising, that the middle class is losing income, and some 5.5 million fewer Americans have jobs today than in 2007?

8) Is it fair that roughly 88% of political contributions from supposedly impartial network television reporters, producers and other employees in 2008 went to Democrats?

9) Is it fair that the three counties with America’s highest median family income just happen to be located in the Washington, D.C., metro area?

10) Is it fair that wind, solar and ethanol producers get billions of dollars of subsidies each year and pay virtually no taxes, while the oil and gas industry which provides at least 10 times as much energy pays tens of billions of dollars of taxes while the president complains that it is "subsidized"?

11) Is it fair that those who work full-time jobs, and sometimes more than one in order to make ends meet have to pay taxes to support up to 99 weeks of unemployment benefits for those who don’t work?

12 Is it fair that those who took out responsible mortgages and pay them each month have to see their tax dollars used to subsidize those who acted recklessly, greedily and sometimes deceitfully in taking out mortgages they now can’t afford to repay?

13) Is it fair that thousands of workers won’t have jobs because the president sided with environmentalists and blocked the shovel-ready Keystone XL oil pipeline?

14) Is it fair that some of Mr. Obama’s largest campaign contributors received federal loan guarantees on their investments in renewable energy projects that went bust?

15) Is it fair that federal employees receive benefits that are nearly 50% higher than those of private-sector workers whose taxes pay their salaries, according to the Congressional Budget Office?

16) Is it fair that soon almost half the federal budget will take income from young working people and redistribute it to old non-working people, even though those over age 65 are already among the wealthiest Americans?

17) Is it fair that in 27 states workers can be compelled to join a union in order to keep their jobs?

18) Is it fair that nearly four out of 10 American households now pay no federal income tax at all, and is a number that has risen every year under Mr. Obama?

19) Is it fair that Boeing, which is a private company, was threatened by a federal agency when it sought to add jobs in a right-to-work state rather than in a forced-union state?

20) Is it fair that our kids and grandstands and great-grand-kids who never voted for Mr. Obama will have to pay off the $5 trillion of debt accumulated over the past four years, without any benefits to them?

What do you think? Was it fair?

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China and US Try to Make Trade Progress to Save Global Economy …

dgriffith401.wordpress.com12/16/11

“The one thing that we can be certain of, among all the uncertainties, is that the global economic recession caused by the international financial crisis will be chronic,” he was quoted as saying by the official Xinhua news …

How The U.S. Is Quickly Becoming A Third World Country (Part 1 …

seekingalpha.com11/22/11

… 3rd world status. Economic data indicate a harsh reality that obviates mainstream political debate. The evidence suggests that, without fundamental reforms, the U.S. will become a post industrial neo-3rd-world country by 2032. … According to the Economic Policy Institute, the U.S. trade deficit with China alone caused a loss of 2.8 million U.S. jobs since 2001. Falling Real Wages and Household Incomes. Workers earning more dollars are actually poorer in terms of …

Major financial crises have occurred many times in the United States, and the one in 1929 wasn’t the first, and the present one won’t be the last.

The earliest one on record was in 1792, and there were several crises in the 19th century and also in the 1980′s

In short, recession cycles should be understood to be a normal part of living in a world of inexact balances, one in which there is an attempt to balance supply and demand.

The present world-wide economic crisis, which was caused by the United States wasn’t simply a result of unexpectedly large losses in subprime mortgages or because many of those loans were securitized in complex bonds.

In retrospect, it would seem that the major contributor to the collapse, was what are known as repurchase agreements, which are commonly known as repos.

A repo is a form of short-term borrowing for dealers in government securities. The dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day.

For the party selling the security, and agreeing to repurchase it in the future it is a repo, and for the party on the other end of the transaction, the one who is buying the security and agreeing to sell in the future, it is a reverse repurchase agreement.

Repos are classified as a money-market instrument and they are usually used to raise short-term capital and the Fed uses repos to manage the aggregate reserves of the banking system.

The size of the repo market continually varies so it’s impossible to state its actual size, but it’s generally thought to hover around the $10 trillion mark at any given time.

Banks rely heavily on repro loans, and what caused the collapse of Bear Stearns and Lehman Brothers, was that the repo market panicked because of rising doubts about subprime securities, and loans suddenly became more expensive, or totally unavailable.

So What Can Be Done?

The Obama administration has a plan to protect the country and the world from the next financial crisis, and it can basically be divided into three parts.

1) Stiffer Capital Requirements

Some banks and other financial institutions would be considered too important to fail, because their collapse would pose a threat to the country’s financial stability.

Citigroup, Bank of America, Goldman Sachs and similar institutions would I imagine, be on the government’s most protected species list.

The companies on the list would face stiffer capital requirements in the form of shareholders’ investment, with the idea being that greater capital would provide a larger buffer against losses and a crises.

It might be of interest to note however, that at the time of writing that none of America’s biggest banks are any longer in the top three world-wide.

The top three banks in the world by market capitalization are;

1) Industrial and Commercial Bank of China
2) China Construction Bank
3) Bank of China

Citibank and Bank of America are not even on the list of the top twenty.

Two Canadian banks, Royal Bank of Canada (RY) and Toronto-Dominion Bank (TD) have recently made it to the list.

Australia also has two banks listed, and in addition to the Chinese banks, the importance of emerging markets is confirmed by the presence of Itau Unibanco Banco Multiplo (ITU) and Banco Bradesco (BBD).

The problem with the administration’s protected species plan, is that the very largest financial institutions in America, would effectively become protected and pampered wards of the state and they would most likely squeeze out the smallest ones and lenders would compensate by raising their interest rates or by only lending to the safest borrowers.

2) The Policing Of Unethical Lending Practices

The administration foresees the creation of a Consumer Financial Protection Agency that would police what appear to be unethical lending practices, and ensure that loan documents for mortgages, auto loans and other types of consumer credit are comprehensible.

* The Securities and Exchange Commission would still retain power over the stock markets.

3) Changing The Rules

Financial firms that issue securitized bonds such as bundles of mortgages, auto loans and other credits, would be required to hold 5% of the bonds themselves, the thinking being that this would cause sellers to examine loans more carefully.

In early 2007, when the problems of subprime mortgages and repos first emerged, few if any regulators foresaw the coming meltdown, so the question needs to be asked, “should we trust government regulators instead of bankers, traders and money managers?”.

Due to their past failings, it would seem that we shouldn’t.

The dangers of overregulation should generally not be ignored or minimalized, but especially so in the U.S. whose economy is anchored on risk-taking and expansion.

We don’t yet know exactly what will cause the next financial crisis in the U.S. but its roots are already clearly foreseeable.

By 2019, the U.S. federal debt is expected to be $11 trillion and right now, the Chinese, who are presently supporting the U.S. economy are already preparing a retreat from the dollar.

China has now called for the creation of a new currency to eventually replace the dollar as the world’s standard, and is proposing, if not demanding, a sweeping overhaul of global finance that truly reflects the developing nations’ growing unhappiness with America’s role in the world economy.

If China decides to pull the plug, which is increasingly likely, we will soon understand what caused America’s upcoming financial collapse, but many will say that they didn’t see it coming.

Related posts:

1. Watchdog- “Causes Of Financial Crisis Have Not Been Addressed”.
2. A Meltdown Of The Euro Will Be Far Far Worse Than The Banking Crisis
3. Ten US Banks Needs A Total Of $75 Billion

The first program, which should be up and running within a month is intended to help borrowers that have second mortgages stay out of foreclosure, and it will make cash amounts up to $12,000 available to servicers, investors and borrowers who modify loan terms, and a government spokesperson said that as many as a two million participants in the mortgage-modification program may be eligible for the second-lien assistance.

An example of how the plan would work, would be borrower who had a $250,000 interest only, first mortgage and was paying 6% interest. If the housing expenses were equal to 40% of the borrowers income, then the government would pay $2,625 per year, for five years in order to reduce the payments. Moreover, if that same borrower also had a $43,942 second mortgage and was paying 8.6% interest, then the government might, and I say “might”, pay one half of the $2,336 annual cost for five years.

Overall reaction to the plans seems favorable, with Laurie Goodman who is an analyst at the Amherst Securities Group LP saying, “The new measures may ease mortgage investors’ concerns that the biggest banks and servicers would be tempted to rework too many loans under the program, in order to bolster their home- equity portfolios. Certainly, it appears that the Treasury has listened to first-lien investors and the announcement goes a very long way toward addressing their objections”.

Treasury Secretary Timothy Geithner said in a statement, “Ensuring that responsible homeowners can afford to stay in their homes is critical to stabilizing the housing market, which is in turn critical to stabilizing our financial system”.

Related posts:

1. U.S. Fixed Mortgage Rates Continue To Drop
2. The ‘Loan Modification Program’ Finally Gets Underway.
3. Are Low Interest Rates The Same As Tax Cuts?

Freddie Mac reported that the rate for a 30-year fixed home loan fell to 4.80 percent from 4.82 percent a week earlier, whilst the 15-year fixed rate remained unchanged at 4.48 percent.

The central bank is attempting to drive down interest rates by cutting the supply of outstanding mortgage bonds, thereby boosting their price and lowering their yields, thus allowing banks to reduce their rates on new mortgages, whilst continuing to sell mortgage securities at a profit.

The not so good news is that sales of previously owned U.S. homes fell in March, after climbing by the biggest amount in more than five years just one month earlier.

Purchases decreased by 3% to an annual rate of 4.57 million, which was lower than the 4.71 million which was forecast, and prices were down 12% from a year ago, with distressed properties accounting for about 50% of all sales.

Related posts:

1. Two New Plans Announced To Help Homebuyers
2. Are Low Interest Rates The Same As Tax Cuts?
3. The ‘Loan Modification Program’ Finally Gets Underway.

After Treasury Secretary Timothy Geithner said, “the vast majority of the nation’s banks have enough capital”, U.S. stocks advanced the most in almost two weeks, and Walter “Bucky” Hellwig, who helps oversee $30 billion at Morgan Asset said, “Geithner’s comments that most banks are OK got money coming back into stocks because that pretty much allays yesterday’s fears about stress tests and banks having to raise more capital”.

Even General Motors Corp. rose 2.4 percent to $1.70 after a government auditor said the Treasury will supply the automaker with $5 billion in additional aid.

Meanwhile, David Heupel, who helps manage $60 billion at Thrivent Financial for Lutherans said, “There are still signs of a tough economic environment, but companies that have really cut down their expenses are starting to see a little glimmer of life”.

Fannie Mae and Freddie Mac who are the biggest U.S. mortgage-finance companies, either owning or guaranteeing 56% of all U.S. home loans, just announced that mortgage delinquencies among their “most creditworthy homeowners”, rose by 50% in just one month, and they blamed the fall on both drops in income and too much debt, with 34% of borrowers telling Fannie and Freddie that they were earning less money, and around 20% citing too much debt as their reason for missing their mortgage payments, with a further 8.1% blaming unemployment.

Related posts:

1. The ‘Loan Modification Program’ Finally Gets Underway.
2. U.S. Fixed Mortgage Rates Continue To Drop
3. Two New Plans Announced To Help Homebuyers

The names of banks and what they’ll be getting are;

• JPMorgan Chase – $3.6 billion in subsidy and incentive payments
• Wells Fargo – $2.9 billion
• Citigroup – $2 billion
• GMAC Mortgage, $633 million
• Saxon Mortgage Services, $407 million
• Select Portfolio Servicing, $376 million

The government’s program was announced on February 18th but specific details have only just become available, and the delay caused major frustration amongst housing counselors and distressed homebuyers.

The stated aim of the program is to help as many as nine million borrowers to stay in their homes, and Wells Fargo recently said in a statement, “We view this modification program as yet another incremental opportunity for thousands of homeowners to preserve and maintain the dream of homeownership”.

The government has so far allocated $75 billion, to subsidize a part of the payment reduction, and it will also provide tens of thousands of additional dollars in incentives to participating servicers and borrowers.

Servicers will receive $1,000 for each loan modification, plus another $1,000 a year for three years if the borrower stays current. On top of this, the government will provide an additional $500 to servicers, and $1,500 to mortgage holders if they modify their at-risk loans before the borrower falls behind.

Homebuyers will get up to $1,000 a year for five years if they keep up with their payments, and the money will be used to lower their loan principals.

When asked “Where all this money come from?”, Treasury spokesman Andrew Williams answered, “We’re confident we’ll have enough money”.

Related posts:

1. Two New Plans Announced To Help Homebuyers
2. U.S. Fixed Mortgage Rates Continue To Drop
3. As Stocks Advanced The Number Of Defaulting Homebuyers Rose By 50%

One of the main reasons that the bill is in trouble however is that almost every Republican and many Democrats too argue that no money is presently being allocated to foreclosure relief, apart from a $7,500 tax credit for first-time home buyers.

Last October, the government created the ‘Troubled Assets Relief Program’ (TARP) and its mandate was to purchase or insure up to $700 billion of “troubled” assets from banks and other financial institutions in the hope that it would encourage the banks to resume lending at levels similar to those that existed before the economic downturn.

Senate Republican leader Mitch McConnell put forward a proposal on Monday that has attracted many supporters and possibly just as many opposers.

In a nutshell his recommendation is to offer government-backed, low-interest loans which would be fixed at between 4-4.5 % to any credit-worthy borrower and the amendment would require banks to issue these lower fixed-rate mortgages for both for new homes purchases and for the refinancing of mortgages.

Bert Ely, who is the president of ‘Ely and Company’ which is a financial institutions and monetary policy consulting firm said however that, “McConnell’s 4% proposal would allow for several trillion dollars of mortgages to be refinanced and that would overwhelm the mortgage system. It might sound good, conceptually, but it’s simply not feasible and would have a lot of unintended consequences”.

McConnell countered however that the proposal would make an enormous difference to families and added that he would not like to see the remainder of the TARP money being used to decide winners and losers in the financial markets.

“I do, at the risk of being redundant, think that we ought not to start dictating everything they can do in their businesses. That’s not a great way for them to recover; it’s not a great way for them to raise private capital if they’re really not running the business, we are”.

Related posts:

1. U.S. Fixed Mortgage Rates Continue To Drop
2. Two New Plans Announced To Help Homebuyers
3. Are Low Interest Rates The Same As Tax Cuts?