My New Blog

All of Wall Street should check into “Greed” Rehab and we, as a country, should not take no for an answer. The second portion of the much ballyhooed $700 billion dollar economic bail-out has been put on hold until the suits in Washington can make a decision on future distribution. The first half of our money (folks, we are the ones lending since it is taxpayers money) was recklessly given to federally chartered, traded on the stock market, banks; with an additional 40 billions dollars given to AIG. There were no stipulations, just a few suggestions, on what they should do with the money. You read right. There was no accountability, no report card, no check list. Or, the new buzz word, transparency. The thought behind this decision was that us, poor, common folk could not possibly understand the great, big goings- on of the really smart people on Wall Street. And since they are so smart, we as taxpayers should trust them to do the right thing. Originally, the intent of the bail out money was to help the banks navigate through the mortgage meltdown and credit crunch to give them liquidity to lend to consumers and to help distressed homeowners. Not anymore. Jamie Dimon, CEO of J.P. Morgan Chase is using their “gift” to buy other banks. “It is a great time to buy”, he says. A.I.G., has continued to use their ongoing infusion for employee perks such as spa days and retreats. Other recipients are paying dividends to stockholders and providing pay raises and bonuses to executives. The suits have no idea what these “really smart” people are doing with our money! With this free cash American Express decided to become a bank so they could get a piece of this unsupervised windfall. The credit card companies are screaming, me, me, me. The car giants are jumping up and down for their fair share. According to Thursday’s Financial Times six out of the eight representatives of the Detroit area voted against the bail-out, but now the big 3 have their hands in the till demanding their share: at a cost of $98,000 per member of the United Auto Workers. The functional “greed” addicts look normal and talk about “saving” the economy, but at the end of the day it is about the money and how they can get more cash. The need for discipline and good sense has been overrun by the addiction to lifestyles and mega money. Would you hand over your check book to your drug addicted nephew and ask him to “pretty please” not to buy drugs?

FYI: The subprime borrowers that still have their loans and have been waiting for loan modifications, may be left out in the cold. Since our government is hesitant to give directives, just suggestions, few families in our area have been helped by the 2008 Economic Recovery Act. The government is backing away even further with announcements this past Thursday. If the loan is more that 90 days past due Fannie/Freddie declared they will “help”. (Holy modification! Are they installing a Bat phone for instant communication to halt foreclosures?) Chase will “help” their clients by refinancing to a lower payment but typically that will entail taking a chunk of the principal and putting it aside, only to have it pop up when the homeowner goes to sell or refinance. Gee, is saying “thank you” enough? Some lenders are helping their homeowners, but read the small print on the loan documents: Spend a few bucks and have an attorney go over the documents before signing.

Dear Uncle Sam,

We are very concerned about your ill health and know you are suffering from more than one ailment. Your Primary Care Physician, Secretary of Treasury Henry Paulson, who you trusted to give the correct diagnosis and cure (and please do not take offense, Uncle, but wasn’t he one of the ones that orchestrated the pyramid of greed when he was with Goldman Sachs?) has admitted giving the economy the wrong meds with the $700 billion TARP (Troubled Assets Relief Program). My yard gnomes are forming a charter so they can qualify for their fair share, but they will have to take a number and stand in line behind the cities, counties and sheiks. Since the first half of the money was dispensed incorrectly, doctors from around the country have been called in to try to decide what to do with the remainder. In the meantime, your health is suffering. “Talk” is not an antidote for your ills. Sheila Blair, chair of the FDIC wants to take a few billion to modify loans to a lower interest rate with a “one size fits all” plan. That would have been just dandy a year ago. But today, homeowners are “underwater” in their equity, so unless there is a principal forgiveness program attached, it will not help many home owners. Ben Bernanke, Fed chair, has continued to drop the Fed rate and it will probably go to zero in the next few months, but current decreases have had no effect. The bond market has plummeted to a five decade low, and that should translate into a 30 year fixed rate of around 5%, but the banks are refusing to alter the rates. “Suggesting” loan modifications or putting unreasonable restrictions for modification on loans for our current time will prolong the pain. Uncle, you are still big and strong even though you are sick. Why don’t you use some of your strength and demand a nationwide directive or law? You could lower the 30 year interest rates to 5.5%, modify all loans with a principal reduction based on current appraised value, and eliminate the income, credit and ratio qualifications for those that truly want to save their homes. We know there is an issue on who owns what loan and the mortgage backed securities have been diluted. But if you do not make the banks take their medicine there will be no cure for the housing market.

We need you to get well, NOW. Love Always, Your Country.

FYI: The new stampede for a quick buck? Home loan modification companies! The new rip-off artists are spreading their scam everywhere! Desperate homeowners are paying upfront, exorbitant fees of between $1700 to $3,000 and if they do not deliver: Too dang bad. There are very few states have a law preventing upfront fees from being charged or have repercussions from services not rendered. Arizona is not one of them.

DIANE GERDES

The day after tomorrow, birds will be singing, jobs will be plentiful; we all will have plenty of money….except for those that don’t. One of the first duties of President-Elect Obama, will be to anoint a new Secretary of Treasury. In past years, the Secretary of Treasury was a peacock position: walk around, look pretty, and make a little noise. With the imploding of the stock market caused by the credit crunch, the position will take on Super-Hero proportions to get the American Economy back on track. But do we really want to jump back on the greedy, credit default swap, subprime train so the soothsayers at Wall Street can go back to making their millions, putting their kids in chic, ultra exclusive schools and traveling in their own private planes? Will the world population, again, have to pay for another catastrophic train wreck? Hank Paulson, the current Secretary of Treasury, orchestrated the $700 billion bail out that can’t get out of the station. Some banks are taking the bail out money and hording it for a rainy day, not lending it, as was the intent. Others, like Fannie Mae are spending the money on their employee’s golf games. The “Hope for Homeowners” is stalled in the never, never land of lenders that cannot or will not make a decision. Bank of America (Countrywide) and Chase have agreed to modify homeowners loans, but with “ terms”. Some homeowners purchased their homes for the wrong reasons: to get on the money train. And since it took the government too long to realize that our economy’s wheels had fallen off, they are abandoning the neighborhoods where values have decreased dramatically and could care less about modifying their loans. The forerunners for the new Secretary of Treasury are: Lawrence “women aren’t as smart” Summers, former Secretary of Treasury for the last year and half of Clinton’s administration, as well as former Prez of Harvard University; and Paul Volcker (he is 205 years old, but the former Fed chair did guide the country out of the last deep recession in the 1980’s under Presidents Carter and Reagan). It is going to take an iron hand and a lot of steam to guide our economy to a prosperity that will prevent history from repeating itself.

FYI: Kenny Budge, our operations manager for 14 years, passed away last Thursday. He was instrumental in building our company with his knack for forming relationships within our industry from real estate agents, escrow officers, branch managers and appraisers. His reputation for integrity with our banks and underwriters have helped us navigate through these current turbulent times. His memory was legendary, since he remembered everything: he was rarely wrong. He was serious about his career, dedicated and loyal with a wicked sense of humor. We are celebrating his life this coming Sunday. Everyone is welcome. 8404 S. Kachina Drive, Tempe, AZ, 5:30 p.m.

DIANE GERDES