A blog about Business & Finance and Politics.
Real Name: Leonard C. Tekaat Gender: male Date of Birth: August 13, 1944 Member Since: November 17, 2008 Last Signed In: September 26, 2009 Profile Views: 13 Blog Views: 1040 Mortgage Modification - The Impossible Dream Obama's Mortgage Modification Program, Make It Work! What The Bakersfield Ca. Didn't Print Obama's Mortgage Modification Program, Make it work! Stop Making Your Mortgage Payments HOW CAPITAL IS CREATED PLAN B - BALANCE CA' BUDGET The Frustrated Women. Letter to Ca. Senator Roy Ashburn Correction November 08 December 08 January 09 February 09 March 09 April 09 May 09 June 09 July 09 August 09 September 09 October 09 November 09 
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Home prices are still decreasing all over most the country. President Obama foreclosure plan is failing. Only a small percentage of millions of homeowner with mortgages that are underwater qualify. His plan does not take into account that most homes in CA .NV. AZ, FL. has decreased in price by 40% or more. The rest of the country’s housing has decreased in price an average of 30%. His plan only allows for homes to be 25% underwater. Those homeowner that do qualify complain of rejection and unresponsive banks. The real estate market and the economy in general will not recover fully until the consumer’s financial condition improves and all home mortgages that are underwater are modified so these homes and their owners can be included into the economy. The homes that are underwater cannot be sold or brought until they go through a short sale; foreclosure or the banks and servicing companies forgive, in some manner, the excess portion, of the loan The AP news service ran this article but the Bakersfield Californian didn't print it. Gov't helps keep loans cheap -- if you can get oneGov't aid makes loans for homes and cars cheap. Just 1 problem: banks not so eager to lend
NEW YORK (AP) -- It's a good time to borrow money for a home, car or small business. 
AP - FILE - In this March 19, 2009 file photo, a sign advertising a 30-year fixed rate mortgage of ... A year after a global freeze in the credit markets prompted massive government intervention to prevent the financial system from collapsing, interest rates remain at historic lows. But banks are demanding more collateral, bigger down payments and detailed financial histories from borrowers.
And that's for people with good credit. Everyone else need not apply. The stingy lending is likely to last. "Banks are going to be in a defensive posture for several years. Most borrowers can't meet their criteria," says Christopher Whalen, managing director at research firm Institutional Risk Analytics. No segment of borrowers has been spared: -- Nearly seven of 10 mortgage applications were approved and financed during the housing boom five years ago. At the end of 2008, the number was down to five. -- Revolving credit, which is primarily made up of credit card debt, declined by $6.1 billion, or 8 percent on an annualized basis, in July. That's a sign consumers are having difficulty obtaining credit and are cutting back on spending. To be sure, it is cheaper for businesses and consumers to take out a loan today than it was at the height of the crisis last fall. The average 30-year mortgage rate stands at 5.04 percent, after falling to a record low of 4.78 percent in April. The overnight rate that banks charge each other to borrow money -- a key indicator of the credit markets' overall health -- has plummeted. The London Interbank Offered Rate, or LIBOR, stands at 0.29 percent today. It soared above 6 percent last September when fear threatened to choke off lending throughout the financial system. But those improvements are somewhat misleading. Lending -- especially for homes -- is being greased by trillions of dollars the federal government has made available to banks. The Federal Reserve has provided nearly $340 billion in low-cost loans for banks. It has purchased $625 billion worth of mortgage-backed securities to drive down interest rates on home loans. The Federal Deposit Insurance Corp. is guaranteeing about $300 billion in bank debt, which enables banks to borrow at lower rates. No one wants to see a return to the easy credit that led to the financial crisis. The question is when will credit return to normal -- not too loose, not too tight and not propped up by the government? Not soon, financial analysts and government officials say. "We will not make the mistake of prematurely declaring victory or prematurely withdrawing public support for the flow of credit," says Lawrence Summers, the White House's top economic adviser. Some analysts think it could take four or five years for the Fed to withdraw the money entirely and shrink a balance sheet that is now about $2 trillion, more than double what it was when the financial crisis struck. The government's role in steadying the housing market is huge. Home sales are rising, but more than two-thirds of U.S. mortgages made in the first half of this year were later sold to Fannie Mae and Freddie Mac, which are 80 percent owned by the federal government. Three years ago, Fannie and Freddie's combined share was 33 percent, according to Inside Mortgage Finance, a trade publication. Some financial analysts fear what will happen as the government winds down its lending programs. These analysts say banks have become so hooked on federal aid that they may become even more reluctant to lend once it is gone. The mortgage industry is particularly worried. It has been pressuring the government to extend an $8,000 tax credit for first-time home buyers, fearing a recent increase in homes sales could prove fleeting without the tax break. The White House said Wednesday that it's considering extending the tax credit, which is scheduled to expire in November. "It's the No. 1 question in the market: Can we wean ourselves off our addiction to cheap government-supplied credit?" says Mitch Stapley, chief fixed income officer at Fifth Third Asset Management in Grand Rapids, Mich. If not, the nascent economic recovery could be cut short. Weak lending and borrowing would limit corporate and consumer spending, which accounts for 70 percent of economic activity. The incentives are especially important these days, lenders say, because the habits of borrowers have changed. In a sign that the recession and rising unemployment have made people leery about taking on more debt, the national savings rate was 4.2 percent in July. It dipped to a low of 0.8 percent in April 2008. Big banks are not risk averse. Rather, their reluctance to lend reflects the fact that they must conserve cash to absorb billions in losses still expected to occur from bad loans that were made before the crisis. FDIC-insured banks cumulatively lost $3.7 billion in the second quarter, dragged down by growing numbers of bad loans. These banks set aside nearly $67 billion in the quarter in anticipation of future losses from soured loans. Another factor sapping their appetite for lending is their diminished ability to pool loans into securities for sale to investors, a process known as securitization. This secondary market allows banks to reap fees when they sell the securities, as well as get cash to make more loans. At its zenith, the securitization market funded $9 trillion in loans. The collapse of Lehman Brothers led panicked investors to pull their money out of the marketplace virtually overnight, wrecking the securitization business. "The assembly line for loans is broken," says Whalen of Institutional Risk Analytics. Federal Reserve Chairman Ben Bernanke predicted this week the market "will come back" but probably not at the size it was. For consumers, that's made qualifying for credit a challenge. Germaine Code, of Grand Rapids, Mich., was turned down last month for a mortgage on a $135,000, three-bedroom home because of delinquencies dating back more than 10 years that he says should have been removed from his credit history. "The bank said my credit score was good but that I needed to get those (delinquencies) taken off and that my wife needed more time in her job," says Code, who was able to get a lease-to-own option on the house. During the boom years, home buyers needed a credit score of 660 or above to qualify for the cheapest interest rates, says Greg McBride, senior financial analyst at BankRate.com. Today, they need a score of 740 or above. Home lenders are also demanding proof of income and down payments of at least 20 percent. Before the bust, first-time home buyers often got mortgages with no money down and without proving they could afford payments. The tough climate has forced many would-be borrowers to give up. Consumers ratcheted back borrowing by $21.6 billion from June to July, the biggest drop since the Federal Reserve began keeping records in 1943. That left consumer debt at $2.47 trillion -- slightly less than where it stood at the height of the crisis. "Lots of people are fearful for their jobs. Even if you have good income, you're probably cutting back on borrowing," says longtime banking analyst Bert Ely. The drop in borrowing could slow the economy's recovery. That's why it's critical for the government to continue stimulating lending, especially in the crucial housing market, says David Olson, president of Access Mortgage Research & Consulting. "If they cut back it would be catastrophic," Olson says. "We could have a second downturn." AP Business Writers Rachel Beck and Dan Strumpf in New York, Ieva Augstums in Charlotte, N.C., Adrian Sainz in Miami and Alan Zibel in Washington contributed to this report. COMMENT: Mortgage interest rates historically have been about 100% above the inflation rate for the last 30 yrs. With inflation at 0% and home prices deflating, mortgage interest rates for the last year have been about 5 to 6%, that means they are 500% to 600% above the inflation rate! With the enactment of the Zero Inflation Taxation Policy we could have mortgage interest rates that would be at the lowest possible rate, which should be 100% to 200% above the annual inflation rate To US Treasurer Geithner:
To make housing affordable we need to change the terms of our mortgages so Fannie Mae and Freddie Mac and other government agencies can fund mortgages at lower interest rates.
Banks and financial institutions are not able to loan homeowners money to refinance their homes or for new mortgages, when home prices are decreasing.
If an adjustable rate mortgage was created with a starting interest rate (3%) to jolt the economy back to life, the toxic securities will become valuable again. The interest rate on these new mortgages should increase one-quarter percent per year and cap out at the currant market rate of 5%. To decrease defaults on mortgages, the borrower would have to qualify at the 5% interest rate to obtain the loan. These new mortgages should not be tied to any index.
We are currently trying to capitalize the banks by infusing the money directly into them. This policy is wrong because the collateral is losing value. The value of the collateral must be stabilized first, for the banks and investors to be confident enough to lend money against it.
What will this stimulus plan do for the economy? When the homeowner refinances their home from a 6% mortgage interest rate to a 3% interest rate their monthly interest payment will decrease by 50%. A $1500.00 monthly mortgage interest payment will decrease to $750.00. That will be like the person receiving a $750.00 stimulus check each month for the first year and thereafter a little less each year for the next seven years. Multiply this by millions of people and you will have a stimulus plan that puts the purchasing power were it should be, with the people. The foreclosed property inventory would be quickly sold and housing prices would stabilize. Banks and investors should be encouraged to modify the underwater mortgages by changing the tax code so that it would be beneficial to them and the borrower when the excess amount of the mortgage is reduced. Loaning money to banks does not create demand in the economy, people do!
If mortgage interest rates were available at a starting rate of 3 or 3.5% and the borrower was qualified at a 5% interest rate, the chance of a foreclosure would be close to zero. The eight years it would take for the interest rate to rise to 5% would allow the economy to heal. Business activity would increase; this would increase the value of commercial properties reducing the coming crisis in that area of the economy. With home values stabilized investors will be willing to invest in mortgage securities again rather than treasuries. With the mortgage interest rate increasing every year, the investor will know that their rate of return will increase for the next seven years unlike treasuries.
With the enactment of the Zero Inflation Taxation Policy this will help control inflation and inflation psychology which will maintain the lowest possible interest rate, which will help maintain the value of the mortgage securities. (Go to web site to read about this policy change and its benefits.)
The AP news service ran this article but the Bakersfield Californian didn't print it. I thought that you all might be interested because your comments on my blog point out these facts. If you read my last article I posted, Letter to Treasury or go to my web site www.economysflaw@wordpress.com/ you will find more info on how we can solve the mortgage underwater problem.
Gov't helps keep loans cheap -- if you can get oneGov't aid makes loans for homes and cars cheap. Just 1 problem: banks not so eager to lend
NEW YORK (AP) -- It's a good time to borrow money for a home, car or small business.
AP - FILE - In this March 19, 2009 file photo, a sign advertising a 30-year fixed rate mortgage of ... A year after a global freeze in the credit markets prompted massive government intervention to prevent the financial system from collapsing, interest rates remain at historic lows. But banks are demanding more collateral, bigger down payments and detailed financial histories from borrowers.
And that's for people with good credit. Everyone else need not apply. The stingy lending is likely to last. "Banks are going to be in a defensive posture for several years. Most borrowers can't meet their criteria," says Christopher Whalen, managing director at research firm Institutional Risk Analytics. No segment of borrowers has been spared: -- Nearly seven of 10 mortgage applications were approved and financed during the housing boom five years ago. At the end of 2008, the number was down to five. -- Revolving credit, which is primarily made up of credit card debt, declined by $6.1 billion, or 8 percent on an annualized basis, in July. That's a sign consumers are having difficulty obtaining credit and are cutting back on spending. To be sure, it is cheaper for businesses and consumers to take out a loan today than it was at the height of the crisis last fall. The average 30-year mortgage rate stands at 5.04 percent, after falling to a record low of 4.78 percent in April. The overnight rate that banks charge each other to borrow money -- a key indicator of the credit markets' overall health -- has plummeted. The London Interbank Offered Rate, or LIBOR, stands at 0.29 percent today. It soared above 6 percent last September when fear threatened to choke off lending throughout the financial system. But those improvements are somewhat misleading. Lending -- especially for homes -- is being greased by trillions of dollars the federal government has made available to banks. The Federal Reserve has provided nearly $340 billion in low-cost loans for banks. It has purchased $625 billion worth of mortgage-backed securities to drive down interest rates on home loans. The Federal Deposit Insurance Corp. is guaranteeing about $300 billion in bank debt, which enables banks to borrow at lower rates. No one wants to see a return to the easy credit that led to the financial crisis. The question is when will credit return to normal -- not too loose, not too tight and not propped up by the government? Not soon, financial analysts and government officials say. "We will not make the mistake of prematurely declaring victory or prematurely withdrawing public support for the flow of credit," says Lawrence Summers, the White House's top economic adviser. Some analysts think it could take four or five years for the Fed to withdraw the money entirely and shrink a balance sheet that is now about $2 trillion, more than double what it was when the financial crisis struck. The government's role in steadying the housing market is huge. Home sales are rising, but more than two-thirds of U.S. mortgages made in the first half of this year were later sold to Fannie Mae and Freddie Mac, which are 80 percent owned by the federal government. Three years ago, Fannie and Freddie's combined share was 33 percent, according to Inside Mortgage Finance, a trade publication. Some financial analysts fear what will happen as the government winds down its lending programs. These analysts say banks have become so hooked on federal aid that they may become even more reluctant to lend once it is gone. The mortgage industry is particularly worried. It has been pressuring the government to extend an $8,000 tax credit for first-time home buyers, fearing a recent increase in homes sales could prove fleeting without the tax break. The White House said Wednesday that it's considering extending the tax credit, which is scheduled to expire in November. "It's the No. 1 question in the market: Can we wean ourselves off our addiction to cheap government-supplied credit?" says Mitch Stapley, chief fixed income officer at Fifth Third Asset Management in Grand Rapids, Mich. If not, the nascent economic recovery could be cut short. Weak lending and borrowing would limit corporate and consumer spending, which accounts for 70 percent of economic activity. The incentives are especially important these days, lenders say, because the habits of borrowers have changed. In a sign that the recession and rising unemployment have made people leery about taking on more debt, the national savings rate was 4.2 percent in July. It dipped to a low of 0.8 percent in April 2008. Big banks are not risk averse. Rather, their reluctance to lend reflects the fact that they must conserve cash to absorb billions in losses still expected to occur from bad loans that were made before the crisis. FDIC-insured banks cumulatively lost $3.7 billion in the second quarter, dragged down by growing numbers of bad loans. These banks set aside nearly $67 billion in the quarter in anticipation of future losses from soured loans. Another factor sapping their appetite for lending is their diminished ability to pool loans into securities for sale to investors, a process known as securitization. This secondary market allows banks to reap fees when they sell the securities, as well as get cash to make more loans. At its zenith, the securitization market funded $9 trillion in loans. The collapse of Lehman Brothers led panicked investors to pull their money out of the marketplace virtually overnight, wrecking the securitization business. "The assembly line for loans is broken," says Whalen of Institutional Risk Analytics. Federal Reserve Chairman Ben Bernanke predicted this week the market "will come back" but probably not at the size it was. For consumers, that's made qualifying for credit a challenge. Germaine Code, of Grand Rapids, Mich., was turned down last month for a mortgage on a $135,000, three-bedroom home because of delinquencies dating back more than 10 years that he says should have been removed from his credit history. "The bank said my credit score was good but that I needed to get those (delinquencies) taken off and that my wife needed more time in her job," says Code, who was able to get a lease-to-own option on the house. During the boom years, home buyers needed a credit score of 660 or above to qualify for the cheapest interest rates, says Greg McBride, senior financial analyst at BankRate.com. Today, they need a score of 740 or above. Home lenders are also demanding proof of income and down payments of at least 20 percent. Before the bust, first-time home buyers often got mortgages with no money down and without proving they could afford payments. The tough climate has forced many would-be borrowers to give up. Consumers ratcheted back borrowing by $21.6 billion from June to July, the biggest drop since the Federal Reserve began keeping records in 1943. That left consumer debt at $2.47 trillion -- slightly less than where it stood at the height of the crisis. "Lots of people are fearful for their jobs. Even if you have good income, you're probably cutting back on borrowing," says longtime banking analyst Bert Ely. The drop in borrowing could slow the economy's recovery. That's why it's critical for the government to continue stimulating lending, especially in the crucial housing market, says David Olson, president of Access Mortgage Research & Consulting. "If they cut back it would be catastrophic," Olson says. "We could have a second downturn." AP Business Writers Rachel Beck and Dan Strumpf in New York, Ieva Augstums in Charlotte, N.C., Adrian Sainz in Miami and Alan Zibel in Washington contributed to this report. COMMENT: Mortgage interest rates historically have been about 100% above the inflation rate for the last 30 yrs. With inflation at 0% and home prices deflating, mortgage interest rates for the last year have been about 5 to 6%, that means they are 500% to 600% above the inflation rate!
If you agree e-mail this letter to your family and friends. Fax it to the US Treasurer 1-202-622-6464 - White House 1-202-4562461.
Let me know how you feel about the government Modification program and Make Homes Affordable program! www.economysflaw.wordpress.com/ Mr. US Treasurer Geithner: To make housing affordable we need to change the terms of our mortgages so Fannie Mae and Freddie Mac and other government agencies can fund mortgages at lower interest rates.
Banks and financial institutions are not able to loan homeowners money to refinance their homes or for new mortgages, when home prices are decreasing.
If an adjustable rate mortgage was created with a starting interest rate (3%) to jolt the economy back to life, the toxic securities will become valuable again. The interest rate on these new mortgages should increase one-quarter percent per year and cap out at the currant market rate of 5%. To decrease defaults on mortgages, the borrower would have to qualify at the 5% interest rate to obtain the loan. These new mortgages should not be tied to any index.
We are currently trying to capitalize the banks by infusing the money directly into them. This policy is wrong because the collateral is losing value. The value of the collateral must be stabilized first, for the banks and investors to be confident enough to lend money against it.
What will this stimulus plan do for the economy? When the homeowner refinances their home from a 6% mortgage interest rate to a 3% interest rate their monthly interest payment will decrease by 50%. A $1500.00 monthly mortgage interest payment will decrease to $750.00. That will be like the person receiving a $750.00 stimulus check each month for the first year and thereafter a little less each year for the next seven years. Multiply this by millions of people and you will have a stimulus plan that puts the purchasing power were it should be, with the people. The foreclosed property inventory would be quickly sold and housing prices would stabilize. Banks and investors should be encouraged to modify the underwater mortgages by changing the tax code so that it would be beneficial to them and the borrower when the excess amount of the mortgage is reduced. Loaning money to banks does not create demand in the economy, people do!
If mortgage interest rates were available at a starting rate of 3 or 3.5% and the borrower was qualified at a 5% interest rate, the chance of a foreclosure would be close to zero. The eight years it would take for the interest rate to rise to 5% would allow the economy to heal. Business activity would increase; this would increase the value of commercial properties reducing the coming crisis in that area of the economy. With home values stabilized investors will be willing to invest in mortgage securities again rather than treasuries. With the mortgage interest rate increasing every year, the investor will know that their rate of return will increase for the next seven years unlike treasuries.
With the enactment of the Zero Inflation Taxation Policy this will help control inflation and inflation psychology which will maintain the lowest possible interest rate, which will help maintain the value of the mortgage securities. (Go to web site to read about this policy change and its benefits.)
To end the recession quickly there are four objectives that must be met.
1.More money must be created in the private sector to increase demand.
2.A majority of people in the economy must receive this money.
3.People's monthly outlays must not increase.
4.The Federal Government's deficit must not increase. It must be reduced.
Increasing taxes or decreasing taxes does not meet these objectives. Increasing taxes increases people's monthly outlays. Decreasing taxes increases government's deficits.
There is only one thing that meets all four objectives. The lowering of mortgage interest rates and the forgiveness of that portion of the mortgage that makes the home underwater. Underwater meaning the home will not sell for as much as the unpaid balance of the mortgage.
When people refinance their homes, at a lower rate of interest, their monthly outlays will decrease. This leaves more of their income to cover other expenses and purchases, thereby increasing economic activity. As the money supply increases prices and employment will stabilize and then increase.
All homes that are under water will need to have their mortgages adjusted, sold by short sale or foreclosed upon, for the economy to fully recover.
When mortgage holders forgive the amount of the mortgage that causes the home to be underwater, they will not need to go thru a foreclosure, which is costly and time consuming. The mortgage will become a performing asset, making it more valuable and easier to sell.
If the mortgage holders, of the homes that are underwater, are hoping that home prices will return to the high prices of early 2007, they are not going to see it happen. Foreclosures are increasing as unemployment increases. More people are growing wary of paying payments on a home that cannot be sold for the amount of the mortgage. The mortgage holders are more likely to end up with a foreclosure on their books, unless they come to realize the reality of the situation. Banks, mortgage holders and financial intuitions will make more money in a working economy that is expanding, than the amount of money they will be forgiving.
The Capitalistic entity of our economy should remember, that they played a pivotal role in the creation of the currant economic crisis and therefore should bear some of the cost of correcting it. If the entity does not come to this conclusion, the Committee For Economic Reform And A Better Economic Future will call upon other political groups, such as the Tea Party organizations, to organize a national protest by all homeowner that are underwater to stop making their mortgage payments. All the people who do not have a home that is underwater should support the protest because this recovery plan will increase their homes value by decreasing the amount of foreclosures in their neighborhood. By stopping payments, by a large amount of people, will get the Capitalistic entity's attention. They will be more likely to participate in this economic recovery plan.
People should be informed that being behind in their mortgage payments is the only way they will qualify for any of the government's home affordability programs.
The refinancing and adjustment of all mortgages will increase economic activity and end the recession quickly by increasing consumer’s confidence and disposable income.
Other economic policy paper by the author are located at http://economysflaw.wordpre... 1.ZERO INFLATION TAXATION POLICY 2.ALTERNATIVE ECONOMIC STIMULUS PLAN 3.REPEATING THE MISTAKES OF THE GREAT DEPRESSION 4.HOW TO REDUCE OIL IMPORTS WITHOUT CAP AND TRADE 5.STIMULATE THE ECONOMY WITHOUT A HUGE DEFICIT 6.LETTER TO US TREASURY TIMATHY GEITHNER 7.STABILIZE THE VALUE OF YOUR HOME 8. RESTORING THE HEALTHCARE MARKET SYSTEM
A comment was posted to a recent article and blog. Leonard C. Tekaat, chairman of the Committee For Economic Reform and a Better Economic Future, wrote the article. The article was Plan B-Balance the CA. Budget on 5-20-09. The comments were: Debt can only truly be liquidated by the creation of new real capital. Capital is the excess value derived from labor. Debt is not money.
After reading these statements, I wondered how many other people had the same opinion.
Capital is not created by excess labor. If this were true, then we should be creating more supply to stabilize prices.
Take the housing market. Each foreclosed or empty house represents an enormous amount of labor and value, yet prices are decreasing, eliminating capital. If we were to expend more labor, to increase capital, the price of the new capital would decrease, thus decreasing people’s disposable income when the house is sold. This situation would decrease the ability, of all the people involved in creating the house and selling the home, to participate in the economy. This would reduce economic activity and deepen the recession.
Maintaining a balance economy creates capital. Where maximum economic activity can take place. In an economy where a person labor and production value is maintained by sufficient demand.
If a person income is decreased and they need to balance their income with expenses, they will either use their savings or reduce their expenditures. When the savings are gone and expenditures must be decreased, this will deepen the recession. If the person uses debt to increase income, to balance their expenditures, they are creating a lien against future income. This would prolong the amount of time before they would be able to fully participate in the economy, there-by decreasing economic activity in the currant economy.
Another statement was made that until debt was liquidated no increase in purchasing power would be gained if interest rates were lowered to zero. It is not the debt that reduces a person’s purchasing power, unless the person increases their principal payment. It is the cost of the interest on the debt that decreases the persons disposable income the most, The principal amount on an mortgage is only about 10% of the first years mortgage payment on a 30yr mortgage with a 6% interest rate. If interest rates are lowered and homes are refinance or bought, the person’s purchasing power (disposable income) is increased.
Debt is money. Unless you exchange your goods and services with Federal Reserve notes, you are facilitating the exchange with credit money. The federal reserve notes that you do not have in your possession and government treasury notes and bonds allows banks to increase the money supply, by many times the amount of reserves they have on deposit. Banks create credit money by loaning their excess reserves out. It is then returned to them as it is spent in the economy and the payments are received with interest. It is then loaned out again and again creating more and more credit money.
I am not suggesting that we should have maintained housing prices at their high point, obtained in the housing bubble. The housing bubble was a very bad economic mistake on the part of the Federal Reserve and the Federal Government. There is a discussion on how this happen and how it can be corrected in the Alternative Economic Stimulus Plan http://economysflaw.wordpre...
This information is to inform you that there is another way to balance the budget, stimulate the economy, increase employment and end the recession! By enacting the policy changes we are purposing, they will stimulate the entire California economy. They will increase more people's disposable income faster and by a greater amount than the federal government's huge deficit. By increasing people's disposable income, this will increase demand. With increased demand, production and service companies will want to increase production and services. They will want to employ the unemployed, increasing their disposable incomes, there-by re-starting the economy! .
With the economy restarted and less people unemployed, it will reduce government’s liabilities and increase state and local government revenues, thus the blancing the budget WITHOUT TAX INCREASES!!
Your question is. Making it –
What are you doing about the recession?
We are looking forward for a better future.
I went to the Bank of American on Coffee Rd about 1:00 PM today 5-16-09. There was a woman standing on the sidewalk, holding a sign. It read Bank of America was predatory, charged excessive fees and used unfair practices. I gave her thumbs up. In other word, it was ok with me that she was out there, determined to be heard. It was hot. It showed that she had true grit. People don’t usually picket alone. People sometimes look at people who stand up for their beliefs as an oddity and they are partly crazy. These brave soles don’t prescribe to the herd mentality.
I went into the bank and took care of my business because the bank was closing in five minutes. When I came outside she was still there. I walked over to where she was standing. I asked her what the problem was? Was her home in foreclosure? She said no. She said she was frustrated and had enough of Bank of America. She said she had made her mortgage payment today 5-17-09. The bank gave her a receipt that stated they had received the payment on 5-18-09. She asked the bank to change the date. She said, they said they couldn’t do it until Monday. She told them that I bet you will draw interest on my money and then charge me every dime you can on my mortgage..
She had had enough; of the bank’s attitude She told them that she was going to picket them. They were not concerned about her, she was one person. They said go ahead and picket us. She said, I will.
She left the bank and got the supplies to make the sign. She did what she said she would do. She picketed Bank of America the largest bank in the US. She was David against Goliath. She was Jesus without his disciples. She believed in what she was doing. She found her strength in the fact that she believed she was correct.
I tried to take a picture of her with my Iphone but the battery was dead. I told her i would make her voice louder by posting a blog on Bakersfield.com blog. There is strength in numbers. If anybody has had a similar experience with Bank of America. she said she would be back. I wish her the best.
I would like to share a letter I wrote to our Senator Roy Ashburn. Please feel free to post your comments. If you agree with me and don't want our government putting our posterity into massive debt, with its huge deficit, and you don't want your taxes increased, vote on Tuesday. Call Senator Roy Asburn (661-323-0443) and your US Senators and Representatives. Get involved. Call the Bakersfield Califorian, they are in favor of the tax hikes 661-395-7384. It won't happen if people think that President Obama and the government will take care of it. They are not on the same wavelength as we are. They are not hearing us. We have to shout all together, at the same time, for our representatives to do what we want them to do, (Let us improve our financial condition, increase our freedom, maintain our responsibilities) for our families and ourselves, now and in the future. The power is ours. We are the R.E.B.E.L.Es
To the Honorable CA Senator Roy Ashburn
I am sending you this information to inform you that there is another way to stimulate the economy, increase employment and end the recession.
By enacting the policy changes I am purposing, it will stimulate the entire California economy. It will increase more people's disposable income faster and by a greater amount than the federal government's huge deficit.
By increasing people's disposable income, this will increase demand. With increased demand, production and service companies will want to increase production and services. They will want to employ the unemployed, increasing their disposable incomes, there-by restarting the economy.
With the economy restarted and less people unemployed, it will reduce government's liabilities and increase state and local government revenues, thus the budget will be balanced.
I don't think the props will pass. We are going to need a Plan B. I know that the federal stimulus money comes with directions on how to spend it. Perhaps if you and I explain to the Governor how this plan would benefit California's entire economy, he could obtain an exemption from President Obama. We could lead the other states to do the same. The federal government may take a closer look at what it is doing to our nation with its huge deficit. (Weakening the dollar by increasing the money supply without increasing supply, this will cause interest rates and communities prices to go up creating inflation, increasing the cost of our production, which makes our exports more expensive, increasing our trade imbalance, weakening the dollar further).
As far as real estate is concerned, the tax credits are too narrow to stimulate the economy enough to restart the economy. Most first time homebuyers do not pay enough income taxes to make the tax credit a viable stimuli. People, who pay that amount of taxes, are more likely to already own a home.
Enclosed you will find a copy of a letter I sent to the editor of the Bakersfield Californian and two articles from the Alternative Stimulus Plan.
Stabilize The Economy For The Future
The collapse of our economy was caused by the sub-prime mortgage industry and by people that did not understand the dangers of credit. Add in greed, and you have the perfect storm heading towards a major economic crisis.
I have been working on the problem of excessive use of credit, when prices are increasing (inflation) for quite a while. The government is not addressing this core problem of all recessions since 1945. The currant government's policies, to end the recession, are the same as they have been since World War II.
Huge deficits and increased government programs and regulations lead to another round of inflation, ending in a recession. Both major political parties use these same policies. Many economists support these policies. I disagree.
These economic policies are policies that John Maynard Keynes, the renowned British economist of the 1930s created before he was considered an economist. Many of the economist of his time thought he was incorrect in his theories. But he was correct in his time, in an inefficient way. These economic policies, I believe, are not suitable for our modern economy. They are slow and inefficient.
Our economy has changed tremendously since the 1930s. We have more safety nets in place. The main means of exchange in the 1930s was paper money. In our economy the primary means of exchange is credit. People have become more aware of credit and are not concerned about going into debt.
The new policies I want enacted will improve our economy and bring our economy out of recession, without creating another inflation cycle, which would end in another recession.
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I believe, that if the Alternative Economic Stimulus Plan had been in place, the recession would not have gone as deep and the severity of the collapse of the stock market and employment would not have been as bad.
Article Number One
INTEREST RATE REDUCTION
I want you to ask yourself three questions?
1.What is the first thing the Fed does to stimulate the economy?
Answer: Lower interest rates, this permits people and business to refinance their debt at a lower rate of interest, which in turn lowers their monthly payments, freeing up monthly income, which increases their disposable income. With more disposable income, people have money to spend on other things, other than interest payments.
2. Why did it not work this time?
Answer: Collateral prices were going down. Banks or investors cannot refinance people’s loans until the price of the collateral stabilizes. When the banks did not follow the Fed’s lead, of lowering interest rates, it made the deflation worse, creating the collapse of employment and the stock market. The enterprise-capitalistic economic system cannot operate without a means of exchange.
3. How do we solve this problem?
Answer: The banks cannot lower their interest rates low enough because of the risk factor of the collateral’s price going down. They have to make a profit and pay a high enough interest rate to keep their depositors satisfied. The secondary securities market is froze up for the same reasons. Fannie Mae and Freddie Mac can only offer market rate loans, which will help, but they are not low enough to jolt the economy back to life. The Fed is the only one buying the mortgage securities created by Fannie Mae and Freddie Mac because they are fixed rate mortgages and investors can see another round of inflation in the near future. This is why the government’s thirty-year bond auction failed in May 2009. As unemployment continues more mortgage defaults are going to occur. This will create more mortgages that will go into foreclosure. This will reduce investor and consumer confidence, in there long term planning for the future.
President Obama's plan to correct the problem of homes that are underwater is not going to help the majority of homeowner, because most homes are underwater more than 5%. These people are anchored down to their homes and cannot be mobile, reducing their ability to relocate to find employment; there-by increasing the chances they will abandon their homes to the bank. Read the Alternative Economic Stimulus Plan on how these problems can be solved.
The US Treasury, which is a not for profit government agency, can borrow the money from the Fed, just like the banks do, and fund the refinanced and new mortgages, at near cost, until the collateral’s price stops decreasing and investors start investing in the new mortgage securities. When a recession occurs investors and other people take their money out of the stock market, investments and banks and buy US treasure notes. The Treasury can put this money back into the economy by obtaining it on the open market and funding the refinanced and new mortgages. This policy will not expand the money supply.
The Treasury would receive the cash flow to fund more mortgages. When the economy is up and running again the Treasury would sell the mortgages to investors.
The banks and other financial institutions would arrange these new loans and mortgages or modification agreements. The banks will make huge amounts of money rewriting the mortgages and servicing them. Thereby the banks will become profitable and the fees and servicing charges will help capitalize the banks. The non-performing assets will become performing assets decreasing their loses.
It has always been the 90% of the working population who spend their money and pay their bills that brings the economy out of recession. Helping the other 10% is a noble effort, but it is not enough economic stimuli to bring us out of this deep recession. When the disposable income of the 90% increases, with their good credit rating, they are able obtain credit, which expands the money supply. They can spend money on household goods and services, big-ticket items, autos and trucks ECT. With increased demand, businesses will increase production and employ the unemployed people, increasing more people’s incomes. When the economy comes out of recession this will help the other 10% more than any government program.
Article Number Two
STABILIZE YOUR HOME’S VALUE.
All across this nation people have seen their home values decrease. There are three things that must be done to maintain the price of your home.
1. Enact the Zero Inflation Taxation policy. This policy will increase the confidence of investors, to make long-term money investments, creating a market for 30yr mortgages. It will automatically change the income tax, as economic conditions change in our economy, from recession to the inflation cycle. This policy change will reduce the excessive use of credit during the inflation cycle, which creates higher inflation rates.
2. Interest rates are too high. All through the 1930s the banks kept interest rates 400 to 600% or more above the deflation and inflation rate, making the Great Depression worst than it should have been. (www.Crestmont/Reach.com) After World War II, interest rates have not been over 100% above the CPI. Currently mortgage interest rates are 550% above the annual deflation rate (CPI), and increasing, as deflation increases.
We must create mortgages that have interest rates that are no more than 200 to 300 percent above the Consumer Price Index. Maintain mortgage interest rates with Adjustable Rate Mortgages at no more than 50 to 100% above the C.P.I. The U.S. Treasury would fund these mortgages, at cost, until the banks have the confidents to lower their mortgage rates and investors start investing in mortgages securities. Then the Treasury would sell the mortgages to investors.
Since we are united nation, it would better for our economy if the federal government adopted the Alternative Economic Stimulus Plan, because it would increase economic activity in all the states. Our economy would recover much faster.
Separate states can do it on their own by rerouting the money from other stimulus programs and the federal stimulus money, to create net lower interest rates for mortgages, by paying part of the interest cost of all home mortgages, say 2%. The state would reduce the amount paid by the state by 1/4% each year until normal economic activity was reestablished or until the market rate for interest rates was reached. Since credit is our primary means of exchange, this policy would allow the state to create its own currency, reducing the Federal Government's power over the state. Interests charges are the cost and profit the Capitalistic entity charges the enterprise entity to maintain the bookkeeping system of our economy. So when the state pays part of the cost of the bookkeeping, it is not paying for a part of the home, it is paying for a part of the bookkeeping cost. Increased economic activity and employment would replace government’s expenditures for this economic recovery plan.
Lower interest rates would stimulate the economy, without huge government deficits. By decreasing mortgage rates by 50%, mortgage payments would decrease. A $1500.00 monthly interest mortgage payment would decrease to $750.00. That is a $750.00 stimulus check every month for 30 yrs. Nov.’s 08 C.P.I. was a negative 1.9%. A 3% starting mortgage rate would be 490% above the deflation rate. This policy will make housing affordable. It will bring more buyers into the market and eliminate the foreclosure problem. With safe guards included, the chance of another housing bubble occurring is practically nil. Read ALTERNATIVE ECONOMIC STIMULUS PLAN
When the economy is correctly guided it will produce more tax revenues for federal, state and local governments without raising taxes, as the California Congress has done. The tax increases can then be eliminated and the government reduced in size.
3. Call! President Obama 202-456-1111 Fax 202-456-2461 Treasurer Tim Geithner Fax 202-622-2000 Opinions? www.bakersfield.com or www.contactingcongress.com Blog this information across the country.
The last four letters in American are I CAN. We can do this together and as a nation of free people. We are responsible for the laws and policies our economy is guided by.
Free info. http://www.economysflaw.wor...
Leonard C. Tekaat is a retired economic Analyst, Financier, Investor, businessman, author, and a former Candidate for California Congress. He has experience in the financial world of over 40 years.
Economic policy papers by the author are: 1.ZERO INFLATION TAXATION POLICY 2.ALTERNATIVE ECONOMIC STIMULUS PLAN 3.REPEATING THE MISTAKES OF THE GREAT DEPRESSION 4.HOW TO REDUCE OIL IMPORTS WITHOUT CAP AND TRADE 5.STIMULATE THE ECONOMY WITHOUT A HUGE DEFICIT 6.LETTER TO US TREASURY TIMATHY GEITHNER 7.STABILIZE THE VALUE OF YOUR HOME and other articles.
Copyright by Leonard C. Tekaat all rights reserved
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