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The markets did the happy dance this past week when the stock market traded above 9,000 and the housing market showed signs of recovery with more homes sold in June than expected. The soothsayers predicted that the recession is almost over, so our government could now focus on providing Americans a one-size-fits-all national health care program that will cost an arm and a leg. It has not been decided whose arms and whose legs will have to pay. With our recovery allegedly underway, Uncle Sam’s love affair with Ben Bernanke, Fed chair of the Federal Reserve and Timothy Geithner, Secretary of Treasury is cooling off. So what is it that these guys do and why is their talk of ending the relationships?

The Fed’s responsibility is to guide our economy and direct our nation’s monetary policy by lowering and raising the Fed rate to stabilize prices so that the supply and demand factor does not get out of wack. They are responsible for policing the banking institutions to ensure that they are not ripping us off and are following prudent business practices.

The Secretary of the Treasury is the principal economic advisor to the President. He is responsible for recommending financial, economic, and tax policy, and managing the public debt. Both entities are to have the best interests of the American People at heart.

Timothy Geithner was the past President of the Federal Reserve Bank of New York. He took over the Secretary position from Hank Paulson, the former CEO of Goldman Sacks. Ben Bernanke was a member of the Fed board of governors during Alan Greenspan’s reign as Fed Chair. Both encouraged the preceding market boom with no real guidance and were involved in the economic calamity taking no responsibility.

Now Mr. Bernanke and Mr. Geithner have gone before Congress to ask for more control to regulate our financial system. Their contribution to this crisis has been ignored and nothing has changed to prevent the next financial hazard. While we were home with the kids, working to save our jobs and houses, the Federal Reserve and the Treasury Department allowed a pack of profit mongers to whisper in their ear and distract them so that they were deaf to the economic storm warnings. Instead of giving these morally compromised individuals more power, maybe we should kick them to the curb like any cheating spouse and start over. We are all ready paying spousal support for their past deeds.

THE ECONOMY CUPCAKE

We build rocket ships and jeeps that explore mars, but man-made mistakes are a composite of our existence. Forty years ago this month our government put a man on the moon. This historical moment was viewed on televisions across the globe. Except NASA has lost the original tape. Keep in mind that I am not clever enough to make this stuff up. The guy in charge of this priceless artifact says it may have been accidently erased.

Another historical moment that was erased was a portion of the Glass-Steagall Act of 1933. This depression–era legislation set into motion a change of laws that helped stabilize the banking world. It established the FDIC and guaranteed deposits in banks up to a certain amount. The act prohibited banks from owning other financial companies and investing in securities (such as mortgage backed) or speculative activities. It was a separation of banks and investments. That is until 1999 when it was quietly repealed.

This week out-of-this- world profits were posted from Bank of America, CitiGroup, Chase, and Goldman Sachs (they received their banking charter to be eligible for the government “Help the Needy Banks Program “or TARP). With loan modifications a dismal failure and foreclosures spiraling out of control, how did these banks post such profits? Well, by their investments of course! They have invested in other countries, such as China, whose stock market is up a whopping 75% year to date. These same investment strategies caused the financial meltdown last year.

President Obama may be making another mistake by allowing the banks to inflate the economy with hot air. His modification program steered by the same profit mongering institutions is helping few; and his administration seems helpless to stop the continual decline in our housing prices. Buzz Aldrin left his foot print on the moon for all to see on that fateful day in July, 1969. President Obama needs to get some rocket fuel in his engines and leave his own impression on the backsides of the banks, other than his lips, before they crash and burn. Or it will not be a soft landing for any of us.

FYI: In July, 2008 gasoline was $4.11 per gallon according to Triple A. Today it is $2.79.

BY DIANE GERDES

As we spend our weekend with families and friends, the conversation will probably turn to the housing market. How could this happen? Last Wednesday (July 1^st) in the New York Times, an article in response to the announcement that President Obama is proposing a new consumer protection agency to regulate home loans, Michael Barr Assistant Treasury Secretary for Financial Institutions, was quoted as saying: “The new agency will be able to get to the root of the mortgage crisis that we saw in the past.” He must be the cutest guy in the Obama administration and too busy admiring himself in the mirror not have a clue to what happen in our housing market. I will try to help him but keep in mind I did not graduate from an Ivy League school and did not pay attention in any of my classes since I was too worried about my make-up and I do enjoy an adult beverage maybe a little too much, a little too often. So here goes: There are three major events that helped sparked the beginning of the housing melt down. The first was a long ago law with the yawner of a title called the Depository Institutions Deregulatory and Monetary Control Act in 1980. It abolished rate caps for adjustable rate mortgages and made subprime lending viable for lenders. By eliminating the caps it allowed lenders at their whim to set their own guidelines for the adjustable rate mortgages and home equity lines of credit. If you are one of the few in Arizona that still has a home equity line of credit it could go as high as 22% interest (check your note). The second event was the Tax Reform Act of 1986 eliminating interest deductions on consumer and auto loans (that was a great write off, why doesn’t the government bring it back and maybe it would help car sales?) The Tax Reform Act kept the interest deductions on mortgages intact, making our houses an attractive source of financing. “Take cash out of your home by refinancing to buy a car or a plasma TV, or use your home as an ATM and get a home equity line of credit!” Screamed the endless commercials from the banks. These legislative reforms encouraged the development of creative loan programs enabling lenders to charge higher rates of interest and to come up with imaginative underwriting rather than shutting the door on risky borrowers and properties.

But wait there’s more. The third event was introduced in a 1999 article again from the New York Times. Fannie Mae, under increased pressure from the Clinton Administration to expand mortgage loans among low and moderate income people, eased the credit requirements on loans that it would purchase from banks and lenders. Peter Wallison was quoted as saying in the article, ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.'' But what could possible go wrong? The perfect storm was seeded by the suits and the soothsayers that run our economy. Using our energy towards finding solutions instead of finger-pointing could end the housing crisis sooner rather than later. Babysitting the banks is not the answer it only distracts from solving the issues. If Uncle Sam is digging for answers it is a close as the nearest mirror. But will he stop primping and take a long, hard look?