Obama’s Plan

Senator Barack Obama made public a four-part plan to address the current economic crisis – with a focus on his bread-and-butter – the middle class.

Obama has proposed the following:

• Temporary tax credit for firms that create new jobs in the U.S. over the next two years
• Penalty-free withdrawals from retirement accounts over until the end of next year
• Temporary lifting of taxes in unemployment insurance benefits
• 90-day foreclosure moratorium for homeowners “acting in good faith”

Let’s analyze each of Obama’s points individually.

Tax credits for new jobs

In practice, this sounds like a great idea.  However Obama needs to explain where the outlay for such a credit will come from before it can be proven to be beneficial.  What cuts will be made to the federal budget to allow for these credits?  Likely none, given the fact that cutting social programs isn’t what a Democrat is prone to do.  So the real question is what types of taxes will be increased to pay for these credits?  Will Obama propose to increase the capital gains rate even higher than he has already suggested?  Isn’t this a time when capital gains rates should be lowered, in order to provide more confidence in the stock market and to encourage taxpayers to put more money into the Dow, to prevent the daily sell-offs that have occured over the past two weeks?

So maybe he will increase the tax rate for those making over $250,000 a year to come up with the needed money.  But wouldn’t he be taxing the very same S-Corporations who he is also trying to reward with these job credits?  Seems counterproductive to me.

Retirement accounts

This is a very astute idea – giving those who have suffered from steep inclines in mortgage payments or those who have suffered dreadful losses because of a falling Dow a chance to dip into their retirement savings without punishment.

Specifically Obama has placed a cap of 15% with a maximum of $10,000 on the ability to dip into one’s retirement savings.  This maximum threshold sounds like a great idea – seeing as how letting people divest all retirement savings penalty free would leave many financial instituions in a world of pain with the sudden loss of previously guaranteed liquidity.  The loss of liquidity within these very instituitions is what got us into this “credit crunch” in the first place.  Hopefully a loss of what were once thought to be guaranteed funds wont’ put these institutions into a bigger pinch than they currently find themselves in.

Unemployment Insurance

Again, one has to ask where the money in the federal budget will come from to make up for the loss in revenue from nontaxation of unemployment insurance benefits.  Or of course, what taxes will be increased to pay for this proposal.

Foreclosure moratorium

Despite the fact that those who agreed to mortgages on homes who can no longer afford to pay actually deserve to be kicked to the street, it is an unfortuante side effect that foreclosures within a neighborhood devalue the property of upstanding citizens who live within their means.  These fine folks should not be punished for the idiotic actions of others.  However, how Obama plans to interpret the prhase “acting in good faith” will be the real key to this portion of the proposal.

As one can see, there are many holes that need to be addressed in Obama’s plan before a final verdict can be made on its potential for success.  One has to wonder what took Obama so long to address the economic crisis, as this problem has plagued the nation for well over six weeks.  He’s been awfully quiet about the economy until now – just a few weeks before election day.

Kashkari speaks

The “Bailout Boss,” Neel Kashkari, spoke today to provide details on how the taxpayers’ infamous $700 billion will be used.  Namely, Kashkari provided five key arenas in which the Treasury Department will expend this money:

• Purchase of failed mortgage-backed securities
• Purchase of mortgages
• Purchase of equity in banks
• Assistance to delinquent borrowers to prevent foreclosures
• Insurance of mortgage-backed securities and mortgages

These ideas may sound good on paper, or in a speech, as the case may be.  But let’s examine a bit further, especially on the purchase of mortgages and assistance to delinquent borrowers.

During the second presidential debate, Senator John McCain made reference to buying up mortgages and manipulating their terms in order to prevent foreclosures.  It appears Kashkari and the Treasury are on board with this plan.

However, a couple of large caveats need to be made for such provisions.

Firstly, the principal on any mortgage should not be adjusted downwards to reflect the true current property value of a home.  If the federal government is going to bail out borrowers who can no longer afford their mortgages for purchasing homes that have dropped in value, then I (as someone who can pay my mortgage) expect the same treatment.  My property values have lowered in the last 5 years due to the enormous amount of homes that have been on the market in my neighborhood, all of which have struggled to move.  Just because I can pay my mortgage each month doesn’t mean I don’t deserve equal treatment as those stupid enough to buy homes that they couldn’t afford through the use of adjustable-rate mortgages.

What’s good for the goose is good for the gander.  And as a proud gander, I expect my principal to be adjusted just as much as any low-income earner.

Now that’s just not feasible, right?

So instead of adjusting the principal, and punishing the responsible folks of our great nation, what needs to be done is an adjustment on the interest rates.  Bring the interest rates down on the houses purchased by those who bought over their heads.  Most importantly, though, let the losses be realized by the lending institutions who were “mavericky” enough to approve loans to risky borrowers, all in the name of a quick buck.

Let those who caused the housing bubble to inflate and then subsequently pop be the ones to take responsibility.  The banks, the underwriters, the faulty credit score reporters, those that practiced in mortgage fraud – these should be the parties who have to take the losses as a result of decreased interest rates on homes on the brink of foreclosure.  Not responsible Americans, not the federal government, and not taxpayers as a whole.

Palin 2012????

Apparently trouble is brewing within the McCain campaign over Sarah Palin’s strong rhetoric at recent campaign stops.

Could the vice presidential candidate be setting herself up for a run at the top seat in 2012?

It appears likely.

For the past several weeks the McCain camp has likely been seeing defeat in its sights.  Since the economic mess came to light, the American public (whether right or wrong) has placed blame at the hands of President George Bush, and thus by partisan association, on McCain.  As the senator from Arizona has dropped in the polls over the past month, his running mate has become the attack dog asked to do the slimy things needed to destroy Obama’s credentials as a viable candidate in a last ditch effort to reduce Obama’s lead.  By keeping McCain’s hands clean, this would allow him to maintain his war hero / moderate status and to lose with dignity come November 4.

Palin’s attacks at first were considered to be the norm.  She attacked Obama’s relationships with shady characters such as Bill Ayers, Jeremiah Wright, and Tony Rezko.  However an interesting phenomenon began to occur during these campaign stops as Palin continuously attacked Obama’s credibility.  The crowds took the bait a little too well.

Suddenly chants of “kill him” and “terrorist” were becoming more and more vocal as Palin droned on and on with regards to the same talking points about Obama.  The very far right was working itself up into a dangerous frenzy about Senator Barack Obama, as Palin made references to his “palling around with terrorists” and whatnot.  It now appears that McCain has grown weary of the behavior of crowds at these campaign stops, which has subsequently caused the internal strife within the campaign that is being reported.  This has become much more evident as McCain has been forced to address potential voters as they have falsely slandered Obama to his face.  McCain has taken the time to address such comments, only to be received with a round of boos.

But one must stop and ponder Palin’s true intentions, if she’s not doing right by her running mate in 2008.  To an outsider looking in, it instead appears as if Palin is setting herself up for a presidential run in 2012.  She obviously appeals to the far right much more than McCain ever did (thus warranting her selection onto the ticket).

At this point in time it appears that Palin and and Governor Bobby Jindal of Louisiana are the future of the GOP – and will be the top candidates for the Republicans in 2012.  With Jindal having been in the national spotlight for much longer than Palin, she obviously has to use the platform she’s been given in the precious few weeks she has remaining (should McCain lose the election) to give herself a leg up.

What better way than to appeal to the far right – the group of people that have long fallen head-over-heels for Jindal – than representing herself as a fighter who would take any step necessary to win?  With that attitude, her hardcore conservative beliefs, and her “aw shucks I’m just a hockey mom” persona – she just may be able to steal away Jindal’s thunder and thus make herself a frontrunner in 2012.

Thourgh her recent actions at campaign stops, and the infighting resultant of such, she can appease a faction of the GOP that has always been somewhat disappointed with the nomination of such a moderate conservative as McCain in 2008 (whether they will admit it or not) and also replace Jindal as the future of the Republicans – all in one foul swoop!

Palin 2012?

More likely than not.

Troopergate concludes

Though Matt Drudge may not find it newsworthy, this is simply the biggest scandal to hit the 2008 presidential election.

When you combine the phrases “Sarah Palin” and “abuse of power” you get an electrifying news story that pretty much wraps up the race and allows us to crown Senator Barack Obama the new president for the next four years.

An Alaskan investigator’s report found Governor Palin to have violated state ethics laws by trying to have her ex-brother-in-law fired from the state police.  Specifically, the 200+ pages that were made available for public review show that Palin broke a state ethics law that bars public officials from pursuing personal interests through official state actions.

The state trooper, Mike Wooten, was formerly married to Palin’s sister and underwent a bitter divorce, after which Palin leaned on Alaska Public Safety Commissioner Walt Monegan to dismiss Wooten from the force.  Wooten denied to do so and went public with the series of events.

And just hours after the report became public which showed the country the true cut of Palin’s gib, the GOP went on the attack – claiming the report to be nothing more than a smear in the latest case of partisan politics.

If anyone knows about playing dirty and smear tactics, that would be Palin – with the “attack mode” she’s been on for the past two weeks against Obama.

Nevertheless, the motive behind the expose really means nothing.  The fact that Palin was found to misuse her powers is the real issue here.

How can she be trusted to hold the second-highest government position in the nation with such a tainted record?  She absolutely cannot.

Steak sauce!

Last night’s SNL’s 30-minute “Weekend Update” special included a hilarious rendition of Hall and Oates’ “You Make My Dreams Come True” redone for the 2008 presidential election.

Seriously – this is “greatness” defined.  Kudos to Will Forte and Fred Armisen!

Stocks tumble at opening bell

Within the first five minutes of trading today, the Dow dropped 600 points and fell below the 8,000 mark.

President George Bush is scheduled to discuss the economy in a press conference at 9:00am CST.

The G7 can’t meet fast enough.

Folks – Is this is a real emergency we’re facing?  Is this bear market gonna turn around?

Maybe it is time to jump in at these rock bottom, 52-week low prices?

Who knows?

I can tell you this much – I’m going to wait to hear the details from the G7 meeting before jumping back into Wall Street.

How do we sleep when our beds are burning?

Those of us hoping to wake up to good news this morning were severely disappointed.

Overnight the financial crisis that his hit the U.S. economy continued to trickle to markets around the nation.

As domestic stock futures tumbled last night, the European markets were hit heavily.  The English, French, and German markets all fell 6-10% overnight while Japan’s Nikkei Exchange closed down nearly 10%.  Meanwhile Australia closed 8% down and India at 7.4% down.  Things were so bad in Russia that the government closed the markets on Friday and has decided to keep them closed until further notice.

These same countries appear to be following in America’s footsteps in the form of government bailouts.  Japan has offered $45 billion, India has offered $8.2 billion, and three European central banks have offered $120 billion to increase liquidty within each country’s financial institutions.

So now we ask ourselves what the next step will be to eradicate this mess.

We all know that the United States Federal Reserve has taken action, but now its time to find solutions on a more global level.  It has become obvious with this recent course of events that the foreign capital invested into America’s failed mortgage-based securities over the last 10 years was enough to cause banking crises around the world.

A G7 meeting has been planned for this weekend, with the financial heads of the seven major industrial nations in the world to meet and discuss options and solutions to the economic turmoil.  Hopefully a worldwide amicable solution can be identified.

Freefallin’

Anyone who tracked the Dow over the last 1.5 hours before the closing bell this afternoon was privy to some amazing fireworks.

The Dow plunged 679 points (more than seven percent) to close below 9,000 for the first time in 5 years.  For most of the day the Dow hovered at the 9,200 mark.  In what can only be deemed as a sudden rash of stock sales, the Dow closed at 8,579.19.

Various media outlets have all tried to predict when the market will bottom out, so that savvy investors can “buy low and long” to replenish their portfolios.

However, with today’s sudden drop off, when the Dow will hit rock bottom is anyone’s guess.  In seven sessions the Dow has fallen nearly 2,000 points, and there is no end in sight to the madness.

What can be done to retain investor confidence in the market and reverse this trend?

Perhaps once companies are able to obtain funds from the still-frozen credit markets, people will feel more secure in purchasing stock?  Or perhaps once companies get liquidity from the Fed buying up commercial paper?  Maybe if the discount rate at which banks can conduct intra-lending drops even lower?

Regardless, until that momentum shifting event occurs many people, such as myself, will continue to cash out and watch the fireworks from the sideline.

ACORN busted

Nevada state authorities conducted a raid on ACORN offices this week, with reports of canvassers filling out forms with fake names, address, and using celebrity profiles.  After noticing that names and addresses on the forms did not match, and that members of the Dallas Cowboys (such as quarterback Tony Romo and wideout Terrell Owens) were allegedly registering to vote in Nevada.

This is despicable.

Apparently this type of registration fraud is resultant of quotas that are enacted at organizations such as ACORN, which requires employees to enlist 20 voters per day.

Quotas?  Really?

Are these the kinds of games that the liberals have to play to ensure victory in November – with ACORN having already officially endorsed Senator Barack Obama in the presidential election?

On top of this latest scandal, ACORN was one of the key organizations that forced the hands of politicians to deregulate Wall Street so that lending institutions could approve subprime mortgages for low-income and minority wage earners – leading us to the mess we have today.

Groups like ACORN have a place in today’s society.  But with the corruption occuring from top to bottom, it is time to blow up the system and start anew.

Update: It’s not just Nevada! This is a nationwide epidemic that must be addressed immediately.  Senator Obama needs to go public and denounce such activity immediately.

Secretary Pandit?

During last night’s debates, both candidates were posed with the question as to who they would tab to replace Henry Paulson as the next Treasury Secretary.

Both men brought up Berkshire Hathaway’s Warren Buffet – whose lifelong history of sound investment strategies and overall lifestyle of using credit wisely would prove to be an excellent candidate.

Unfortunately Mr. Buffet is 78-years old and probably not looking to spend his twilight years fixing a mess that may take decades to repair.

Senator McCain also referenced Meg Whitman, CEO of eBay, as a possible candidate.  But what kind of banking / investment experience does she really bring to the table?

I’d like to propose a name that has had little traction in this discussion thus far.

Vikram Pandit.

Mr. Pandit is the CEO of Citigroup and has previously spent time as the President and COO of the Investment Banking Group at Morgan Stanley.  After leaving MS and before joining Citi, Pandit started a hedge fund called Old Lane Partners, which was purchased by Citigroup for $800 million.

Mr. Pandit is a rising star in the banking industry, and serves on the boards of Columbia University, the Indian School of Business, Columbia Business School, the Trinity School, and is a former board member of NASDAQ. He holds both a B.S. and M.S. in Electrical Engineering from Columbia, as well as an MBA and Ph.D in finance from Columbia Business School.

At the age of 51, Mr. Pandit has both the educational and professional background to lead the American economy back from the depths of Hades.

Wait, have we even reached rock bottom yet?  No, don’t answer that!