The random musings of me - Bamf

The iPad Keyboard Dock

2010-06-11T19:31:00.000-07:00

Well it's certainly easier to type with the dock. I'll have to work on the quirks of how to use it, but so far so good. With this, writing on the iPad is actually possible. Typing things out on the onscreen keyboard is possible, but not the easiest thing in the world.

Anyway, more on this later as I play with it. I've had it out of the box for 5 minutes at this point.

-- Post From My iPad

The Issues with TARP

2009-02-26T22:00:00.000-08:00

Yesterday, Congress expressed outrage at Northern Trust Corp. for sponsoring a golf event after having “received” funds from the government under the TARP plan. The company maintains they were asked to take the money by the government and did not seek the funds. This presents some interesting issues for both the Congress, businesses, and the taxpayer:

1. While everyone can agree that we don’t want to see taxpayer dollars frittered away by companies that needed help under the TARP program, I’m not so sure we can demand that companies that were asked by the government to take money not use that money in a manner that was consistent with how they ran their business before they received the TARP funds.
2.Members of Congress (specifically Barney Frank), have called for Northern Trust to immediately pay back the funds equal to an amount they spent on this golf tournament. When did Congress start to believe they could influence a company in this manner? Oh yeah, it’s when they forced the company to take money it did not ask for.
3.There are banks that received money from TARP that did not want the money. They were strong armed by the Bush administration into taking this money and want no part of it. It seems apparent now that this was in an attempt to limit the way the American public would see Citigroup’s receipt of TARP funds. But the bigger issue now, is that the government will not allow these banks to pay back to funds without raising the money privately. So you have banks with tens of billions of dollars sitting in reserve for the time they will be allowed to pay back this money to the government. Meanwhile, they are forced to pay interest on this money - that seems like extortion to me.

In the end, TARP will be judged for what it does for the economy. Given that Congress and the previous administration gave the money out with no strings attached, it is absurd for the current administration to put strings on money that banks did not want in the first place - especially while not allowing the banks to pay the money back and run themselves as they see fit.

If Congress continues to try to interfere in banks day to day operations, we will see participation in TARP drop which will be detrimental to the recovery of our economy.

Wake up Congress, give the money to those who need and ask for it. Don’t continue to force your will down on healthy banks.

Bamf

How about helping homeowners, Congress?

2009-02-10T22:00:00.000-08:00

As the bailout plan prepares to be finalized in Congress, and the second round of TARP has just been announced by Treasury, it seems to me that there is no real relief for the initial cause of all the economic issues in the US - the housing market. I know that Treasury today announced they would make $50 billion available to help with mortgage issues, but that is no where near the help the economy really needs to turn around (IMHO that is).

Here is what I would do if I were running things:

There was an idea bouncing around Congress last week that I think had some merit. It was something similar to what I had been thinking about for some time. The plan was to allow qualified homeowners and homebuyers to obtain a 30 year fixed mortgage at 4%. The government would underwrite and guarantee a good deal of this - in fact they would pay banks some of the “lost” interest of doing a mortgate at ~1% below what the normal market rate currently is. The plan stated that it would have to be “fiscally responsible” as well - whatever that means in the time of spending trillions of dollars to try to help the country’s economy recover.

My original plan was similar, but worked more like this:

1. Put a 90 day moratorium on foreclosures for homes that were originally or are currently have their mortgages serviced by banks that are participating in TARP.
2.Banks that took bailout money (and also provided mortgages) would be allowed to sell the portion of the mortgage that reflects the actual value of the home (today’s value) to the government (as a part of TARP). This could be to Fannie or Fredie - or the new bad bank the government is talking about. The government would then lower the interest rate on this loan to 5% (now maybe 4%) for the remainder of the original loan term.
3.The remaining portion of the loan over the actual value of the home today would have to remain at the bank, but would be lowered to a 5% (now maybe 4%) fixed rate for the remainder of the original loan term.
4.Homeowner’s who benefit from this reduction in their interest rate can not expect it to just be a handout from the government, so they will be taxed on the difference in interest they would pay in a given year. You would take the interest “savings” and add it to your AGI - which might put the homeowner’s in a higher tax bracket. Then again, they are getting to stay in their home and are benefitting from this plan.
5.Homeowner’s who do not benefit from this plan would be allowed to take the different between their current interest payments and what they would pay at 5% (now maybe 4%) would be able to take this as a deduction to their AGI. This would provide some equity to those who are not behind on their mortgage and did not help perpetuate the economic mess that we are in now.

Here is what I think this would do for the economy:

1. Banks holding bad mortgages would be allowed to “stop the bleeding” on assets that have continued to go down in value. The banks, nor their shareholders, would be rewarded by receiving more money than the actual value of the home at this time, but would receive the benefit of reducing further writeoffs. The added benefit here is that they would not have to write down the value of the home during the sale because they retain the additional portion of the original loan amount. They will be made whole upon the sale of the house, or the homeowner paying the loan back completely. There is still some risk for the bank, but they bought that risk when they took the loan in the first place.
2.As the banks gain liquidity by the sale of their so called “troubled assets” to the government, they will have the ability to lend more money. They still have to choose to do so, but they will be much better capitalized to do this lending.
3.The government now has 5% (or 4%) return on the investment they have made in the banks now. Sure, there is some risk for the government now since they are taking assets that could in turn drop in value (which they have in the near term), but home’s typically do appreciate over time. The government has less exposure here than they do by just giving the banks the money and hoping they will choose to renegotiate their loans (which they have not done) or to lend more money (again, which they have not done).
4.The tax consequences for this plan could be aided in part by using the money from the interest gained by the government now owning these loans.

For those that would still default on their loans under this proposal, they may not have been in the correct home for them to begin with (or maybe they have lost their jobs as well).

I’m not an economist, but I think a plan like this works on several levels to help increase credit in the overall marketplace as well as providing actual help to struggling homeowners.

A 2% solution brought to you by Bamf.