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It's All Manipulation

I discussed POMO on my radio show on Saturday and got a huge response. One thing that occurred to me is that while this is manipulation, so is everything else the government is trying. What else is stimulus other than a form of manipulation ostensibly designed to unlock animal spirits buried deep inside would-be consumers? And all the other stuff, Cash for Clunkers, Cash for Caulkers, and tax breaks for first-time homebuyers. It's all manipulation. Let's face it, Alan Greenspan has been pounding the table on the importance of a stock market rally, saying it would be more effective than any of those other forms of manipulation.
How did we get to this point? I mean, it has been a long time since we have embraced the notion of asking not what our country could do for us, but what could we do for our country. Outside of our troops dying in the dust of the Middle East, most Americans have become spoiled. We aren't the decadent, arrogant, demonic jerks the Romans were (even as their empire was in decline), but we are going about this the wrong way. Over the weekend, a bunch of people gathered in Washington, DC to demand the government create or force businesses to offer up one million jobs and also continue unemployment benefits indefinitely.

Give me, give me, and give me some more.

Why do we need to be seduced into doing things we used to do anyway? Why does Washington have to smell like a French bordello with all the expensive programs that are supposed to unlock those animal spirits but instead hikes the ante, making the next scheme even more outlandish? The thing that will unlock those animal spirits is belief in this country. That means leadership needs to be focused on uniting, not dividing, the nation. As for economic stimulus, well, letting people keep more of the money they earn would be a step in the right direction. And, contrary to the nonsense spouted by politicians, allowing people to keep their money is not the same as giving them money.

Any other forms of stimulation or manipulation will probably fail because it makes us more dependent. We need to cut the apron strings and find a way back to self-reliance. I hear the Democrats are planning to ram through $400.0 billion in various forms of stimulus during the lame duck period. To this point, it has been our fault for allowing them to play that siren song. Lately, the seductive dance hasn't worked as more people have come to realize that smell is actually sexier when it's not layered on so thick.

In the meantime, shame on those that think government should create false, well-paying jobs, or make businesses hire.

Foreclosure Follies

If you thought the crazy story of one guy giving the stamp of approval on possibly 600,000 foreclosure documents over the past five years with only 1.5 minutes of time to review was isolated, then you are sadly mistaken. Last week, JP Morgan (NYSE:JPM) joined Ally Bank to halt foreclosures in 23 states and then late Friday, Bank of America (NYSE:BAC) joined the fray after company executive Renee Hertzler admitted she didn't read as many as 8,000 foreclosure documents she approved. John Walsh, Acting Comptroller of the Currency, has asked JPM, C, BAC, WFC, PNC, USB, and HSBC to suspend foreclosure proceedings for a couple of months to review the process. The one thing that kept gnawing at me, outside of the absurdness of it all, is why have the banks that admitted screwing up only halting proceedings in 23 states.

The answer is non-judicial versus judicial foreclosure procedures.

Judicial foreclosures: processed through the courts, lender files complaint and recording of Lis Pendens. Must state what debt is, and why the default should allow the lender to foreclose. The homeowner will be served notice of the complaint by mail, direct service, or publication of the notice. If judge allows foreclosure a writ is issued authorizing sheriff's sale. Sale is an open auction held in public place. Sales require cash to be paid at time of sale or substantial deposit with balance paid same day or within 30-days.

Non-Judicial foreclosures: processed without court intervention. The homeowner gets a mailed letter of default and (in many states) a Notice of Default. If default isn't cured, then a Notice of Sales is mailed out to owner, posted in public places, and recorded at the county recorder's office.

It would seem to me that if banks have been making mistakes, including possibly kicking people out of homes they may have been able to keep with proper notification, then entire systems would be revamped. That means all 50 states and the District of Columbia should get the benefit of the doubt whether they are a judicial or non-judicial state. This is really disappointing stuff! It's crazy to think these giant organizations would have one person rubberstamping foreclosures, a decision that crushes families and breaks the will of people. Ironically, the nation needs to get through this phase, and if there weren't so many schemes perhaps it could have happened already and we would find terra-firma in home prices and in our psyche.

Instead, the process is going to be dragged out even more as state attorneys general, the Treasury Department, and lawyers begin to jump into the fray.

I find it curious there is so much desire to push through these foreclosures now, and I'm shocked that it's coming from Government Sponsored Enterprises, Freddie Mac and Fannie Mae, along with the FHA and HUD. What gives?

There is one theory the government is trying to break the banking cartel by forcing swift foreclosures that in the process will be costlier for servicers and the banks that own them. Price discovery will expose the worthless value of second mortgages held by banks. On August 31, Fannie Mae sent letters to servicers demanding an end to delays of foreclosures and selling of foreclosed property. Threatening on-site reviews and assessing fines, Fannie Mae has ratcheted up the angst.

I will say this underscores an inherent problem when the private sector is pushed out and only the government is pulling the strings. With 97% of all mortgages touched by the government these days, it is rather odd that their policies aren't transparent or consistent.

Public Private

We hear much about public private partnerships coming to the rescue, but it's not the way the country comes out of the situation it's currently in. Recently, many bankers say they don't want funds from the small business bill because they don't want to be in bed with their regulator or make themselves vulnerable to the bullying of the government. There is the PPIP that was going to save the housing meltdown but was late to get going. As a result, it has mostly been inconsequential. Yes, some private players are involved, but they are putting up less money than the government and keeping a larger share of the profits. That brings me to the announcement last week that Amtrak wants to develop high-speed rail through a $117.0 billion 30-year plan that would involve private investment.

Government regulation has helped to kill the passenger train industry, especially after 1946. The Naperville train disaster of 1946 resulted in 47 people dead and hundreds more injured. In typical government style, the reaction was new speed limits and by 1951, enhanced signals slowed the max speed to 79 mph. Since 1970 Amtrak, by now the only game in town, began operating and losing massive amounts of money.
Amtrak says that U.S. taxpayers subsidized cost of a typical passenger in 2008 to the tune of $8.00, but the Pew Research Center says the real number is $32.00.

In 2008, only three out of 44 routes made money. I just don't see this program getting out of the station (couldn't resist) even if it does sound great to go from New York to Boston in 84 minutes rather than 215, or NY to Washington in 96 minutes instead of 162. But the cost and time to complete the project is outrageous, and then there's the idea of allowing the government control of the purse strings. Of all the high speed rail lines that have been proposed (Tampa to Orlando, California Coast etc), only the Northeast Corridor (Boston to Washington D.C. would make logistical sense and money. However, that Northeast Corridor is not up for development by private companies, Amtrak and the government have the monopoly on that route.