WHEN Will we ever learn?

By l.t. Dravis

SOMEWHERE – Tuesday, December 3, 2008 – When will we ever learn to stop trusting the ‘smart people’?

We trusted some supposedly smart people, people we pay lots of money to, to use 700 billion taxpayer ‘bailout’ dollars wisely and, now we find out from the Associated Press that those highly-paid, well-benefitted folks let us down.

Auditors from the Government Accounting Office (GAO) are telling us that the Department of Treasury, headed by Henry (Hank) Merritt Paulson, Jr. (you’d think a guy who has a B.A. in English from Dartmouth and an MBA from Harvard and was Chairman and Chief Executive Officer of Goldman Sachs would be fairly smart, wouldn’t you?) failed to understand that it would be stupid to give $150 billion (so far) to banks without monitoring how they spend – and lend – our money.

Right?

Wrong.

The GAO report says, “Treasury has not yet determined how it will monitor compliance with this or other requirements such as limitations on dividend payments and stock repurchases.”

Huh?

Let me translate this into terms people like me (no Harvard MBA, I’ve never been Chairman and Chief Executive Officer of Goldman Sachs, and I’ve certainly never been Secretary of the Treasury) will understand: This is like me going down to my local bank and asking to borrow fifty or a million dollars. I don’t tell the bank how I’m going to spend the money and I don’t tell the bank how much my ‘collateral’ is worth and I don’t tell the bank when, if ever, I plan to give them back their money.

But they give me the money, anyway.

Whattadeal!

The GAO’s 72-page report also tells us that banks are not lending taxpayer money!

But, wait a minute . . . we were sold this ‘bailout’ plan by members of the House and Senate who told us that the whole point of the $700 billion bailout was to stimulate the economy by freeing up credit markets.

These Representatives and Senators talk a lot about ‘putting country first’ and chatter incessantly (especially in front of TV cameras) about how devoted they are to ‘protecting the taxpayers’ of this great nation.

These patriots includes Senator John McCain (Annapolis, class of ‘58), George W. Bush (remember him?), Senate Majority Leader Harry Reid (JD Georgetown University), Senate Minority Leader Mitch McConnell (JD, Kentucky Law School), Senator Chris Dodd, Chair of the Banking Committee (JD, University of Louisville), House Speaker Nancy Pelosi (Degree in something from Trinity College), Representative Brad Miller (JD, Columbia University), Representative John Shadegg (JD, University of Arizona) and too many other well-educated geniuses to mention here.

So, why didn’t even one of these very smart folks understand that it is not very smart to allow bankers to run free with billions of taxpayer dollars?

And, if even one of them was smart enough to figure that out, why didn’t that ‘smarter-than-the-rest’ person do something about it?

Unfortunately, you know as well as I know that we’ll never know.

So, how did Hank’s Treasury Department react to the GAO report?

Neel Kashkari (Bachelor’s degree in Engineering, University of Illinois; Master’s degree in Engineering, University of Illinois, and Master’s degree in Business Administration, Wharton School of Business), is evidently the smartest person in the Treasury Department’s so-called Office of Financial Stability because he’s the guy who actually hands out cash to banks, but he doesn’t think it’s necessary to work with regulators.

In fact, Kashkari is so smart, he’s perfectly comfortable with the Department of Treasury coming up with its own program to monitor banks . . . but he doesn’t know where or when that will happen.

So . . . when will we ever learn not to trust the ‘smart’ people?

We believed them when they gravely announced that we were in a so-called ‘financial crisis’ and we trusted them when they told us, just a couple of months ago, they could save the economy . . . if only we would allow them to borrow $700 billion in our names to give to banks in their names.

How’s that worked out for us?

They let us down . . . again.

Surprised?

I’m not.

Why?

Because this is the same group that pushed us into a pointless war in Iraq war that cost thousands of precious American lives and wounded thousands more and caused countless billions of dollars to be forever unaccounted for. This is the same bunch that sat by and allowed wounded veterans to be ignored and mistreated at Walter Reed Army Hospital. These are the shameless men and women in the Congress of the United States of America who’ve been content to let millions of Americans on the Gulf Coast live with the damage done by Hurricane Katrina . . . 3 years after the fact. And, these are the people who were ‘smart’ enough to spend us into a ten trillion dollar national debt!

So, we shouldn’t be surprised that they let us down on the bailout.

That is what these people do.

They let us down . . . you know that, I know that.

My question is, why do we continue to let them get away with it?

When will we ever actually hold these people accountable to do the jobs we elect – and pay - them to do?

When will we screw up enough courage to tell them to stop wasting their time and our money with self-aggrandizement, posturing, and strutting?

When will we tell them to either do the people’s work or get out of the way so someone else can?

After all, as of 5:04 PM, Eastern Standard time, December 3, 2008, there are 305,802,056 of us and only 535 of them.

So . . . what are we afraid of?

Copyright © 2008 by LTD Associates West, Ltd. All rights reserved.

If you have questions, comments, or concerns, Email me at ltdassociates@msn.com (goes right to my desk) and since I personally answer every Email, I look forward to hearing from you soon.

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FORGET The Wall Street bailout . . . what about a consumer bailout?

By l.t. Dravis

WASHINGTON, D.C. – Monday, November 3, 2008S – Millions of Americans are not only upside down on their mortgages, they’re also upside down on credit card debt, car loans, student loans and other debt, and have no way to create any more buying power. So, if consumers can’t borrow to buy, how on earth do the Washington gurus who engineered the $700 billion bailout think freeing up the credit markets will have any meaningful impact on the economy?

Auto sales in October were down by 45% for General Motors, down by 30% for Ford, and down by 23% for Toyota.

Circuit City announced today that it is closing 20% of its stores nationwide, costing more jobs and reducing sales tax revenues.

The Institute of Supply Management reported today that its manufacturing index fell to 38.9, the lowest reading since September, 1982 when the United States was in the depths of a recession.

Why all the bad news? Because consumers can’t tap credit cards and they sure as heck can’t rely on home equity any longer, now can they?

If consumers – homeowners plus nearly 100 million renters – are buried under mountains of debt, how do Ben Bernanke, Henry Paulson, et al, expect them to take advantage of the freer credit supposedly created by the $700 billion bailout and spend the economy out of recession?

Bernanke, Chair of the Federal Reserve Board, said Friday that “The boom in subprime mortgage lending was only part of a much broader credit boom characterized by under pricing of risk, excessive leverage, and the creation of complex and opaque financial instruments that proved fragile under stress. The unwinding of these developments is the source of the severe financial strain and tight credit that now damp economic growth.”

Translation into plain English: The Wall Street bailout won’t be enough to turn the economy around because subprime mortgage lending is only part of the problem.

Consumers need a restructuring of a variety of types of debt, including car loans, credit card debt, mortgages, student loans, and other debt.

Why?

Because trillions of dollars of current debt prevents consumers from purchasing future trillions in products and services.

So, how do we restructure consumer debt?

We turn it into a profit center for the federal government by purchasing all forms of consumer debt at a discount and restructuring that debt to be paid over extended periods of time, plus a fair rate of interest.

Let’s say that a consumer owes $25,000.00 in credit card debt, $10,000.00 in student loans, and has a $15,000.00 car loan. The total debt of $50,000.00 would be purchased from creditors by the federal government for $40,000.00 and would be secured by tangible property (in this case, the car would be released to the consumer upon receipt of a cash payment or cumulative monthly payments equal to its appraised value). The debt would be paid back by mandatory withholding of monthly payments of $421.93 from the consumer’s paycheck income and/or business income and tax refunds for a period of fifteen years at 6%. This example would generate a gross profit for the taxpayers of $35,947.40.

If a homeowner owed $300,000.00 on a mortgage, $25,000.00 in credit card debt, $10,000.00 in student loans, and had a $15,000.00 car loan, the total debt of $350,000.00 would be purchased from creditors by the federal government for $315,000.00 and would be secured by tangible property (in this case, title to the home and the car, either or which would be released to the consumer upon receipt of a cash payment or cumulative monthly payments equal to the appraised value of either item). The debt would be paid by mandatory withholding of monthly payments of $2098.43 from the consumer’s paycheck income and/or business income and tax refunds for a period of thirty years at 6%. This example would generate a gross profit for taxpayers of $439,434.80. If the home is sold prior to repayment of the loan, the federal government would be entitled to half of the profit but would not sustain a loss.

Consumers, irrespective of current credit rating, would qualify provided they can prove the ability to make monthly payments, agree to attain a minimum 700 FICO score within 24 months, maintain all appropriate forms of insurance on collateral, and file state and federal tax returns, subject to annual audit, on time. There would be no prepayment penalties.

Consumers who serve the nation would be credited with a portion of the monthly payment, dependent upon service rendered. For example, those who serve in the armed forces could receive 75% credit of monthly payments for their period of service, without limitation. Others who teach in inner city schools or practice medicine in rural communities could receive 50% credit of monthly payments for their period of service, without limitation. If then, a homeowner served in the military or taught in inner city schools or served in another approved vocation for thirty years, he or she would able to retire, debt-free, with a paid-for home, and with a substantial retirement income. Done right, we could create a generation of financially secure retirees in this country by 2038.

This approach strengthens the economy in a number of ways:

1. Billions of dollars in buying power are freed up for consumers

2. Consumers who take advantage of the program will manage future credit wisely

3. Banks and other financial institutions are relieved of potentially devastating losses and exorbitant collection costs

4. Small, medium, and large businesses – including service, manufacturing, distribution, transportation, and retailers – benefit from immediate, managed consumer purchasing power

5. Credit markets are stabilized and become predictable and profitable

6. Taxpayers become shareholders in the U.S. economy because they accumulate profits that can be used to lower taxes, offset government spending, and pay down the national debt

Because a consumer bailout is politically distasteful, it would take courageous, thoughtful, intelligent leadership and cooperation on the part of government, business, and consumer groups to fashion a viable program . . . but the risk of not creating a meaningful way to unburden the primary source of economic driving power in this country – the everyday, average consumer – may be fatal for the nation’s economy.

So, it’s time to make a decision . . . which way do you want to go America . . . up or down?

Copyright © 2008 by LTD Associates West, Ltd. All rights reserved.

If you have questions, comments, or concerns, Email me at ltdassociates@msn.com (goes right to my desk) and since I personally answer every Email, I look forward to hearing from you soon.

Want to go to a Blog that listens to you and speaks for you as well?

GO TO bothsidesnowbiz.blogspot.com/ AND SPEAK UP . . .