Bail Me Out

Okay, so everyone's asking what I think of the bailout. Let me get this on the record: I don't know. The fact is, nobody knows. That's one really, really good reason to vote "no".

Most people are a lot like me; they don't really know what the bailout contains, so they're generally opposed to it because this is not what government is supposed to be doing (or, alternatively, this IS what government is supposed to be doing, but it should be doing it for ME, and not for other people, depending on your home base on the political spectrum). But they also recognize that something is very, very wrong with the world financial system, and the only people that seem interested or capable of doing something about it are the people in Congress. So we'd like to see something happen, and sooner rather than later.

Several comments need to be made here:

1. It's silly, and I mean really silly, to blame Republicans for the bailout not passing. If you're Speaker of the House, you have to get more than 60% of your own party on board. No, the GOP isn't helping you, or the President, who is supposed to be a member of their party. Guess what? Right now he's ideologically closer to you than to them, Nancy, a point which I guarantee you won't be emphasizing in the next 5 weeks.

2. Early reaction is that the Republicans are going to catch it for voting this thing down. Nah. There are two reasons this is incorrect: one, the fact is that most of the nation, and by far the majority of people likely to be voting in November, were not supporting this bill, and two, something is finally going to get passed, and if it's even marginally better than what failed, the GOP comes off looking like Horatio at the Bridge. This will not be good for the Democrats.

3. There is a lot being made of how this bill would cost taxpayers $700 billion. This is just silly. It wouldn't cost even close to that much. [note: I am not saying this to support the bailout. I am saying it because it is true. I don't like winning arguments using bad facts or bad logic, even if I can win that way. There are reasons not to vote for the bailout, but this isn't one of them.] The government would be buying assets (at least some of what they spend will buy straight mortgages, for instance), and those assets have value. In fact, they almost certainly have greater value than their cost. I predict that if the bailout finally passes, that the government will eventually turn a substantial profit on the deal. This is actually worse than if the government lost money, and I'll elaborate below.

4. There is at least one plan I have heard that makes much more sense (I think) than what was voted down on Monday. That plan would still authorize the expenditure of hundreds of billions, but would require that those billions be spent exclusively on the whole mortgage notes being held by banks, and not on the Collateralized Debt Obligations (CDOs)those mortgages ostensibly back, much less other debt that banks are holding. This does several positive things, in my opinion. First, it allows the government to demonstrably spend our money on things with real value. Not 100% of face value, I grant this, but some value. Even houses in downtown Detroit or suburban Cleveland have some value. The mortgages can be bought cheap and the value maximized by, second, negotiating the terms of the note with the homeowner when he's in default, to allow him to stay in the house. In a rising market, foreclosure is a good option for recovery of value. In a declining market, it sucks. It not only loses immediate value on the note itself, but it exacerbates the decline of property value across the board, further harming the asset value of your other mortgages. The government has been yammering at mortgage servicers to undertake this negotiative process; this plan would allow the government to just do it themselves. Second sub a, it would put shims under dropping property values by reducing foreclosures. Third, it would pour liquid cash into banks, which is desperately needed, and fourth, it would put a floor under the CDOs, because the bad mortgages that have destroyed their value would now be backstopped by the government. Those notes would therefore begin to trade again, and the machine would re-start.

This plan, I suspect, has no possible chance of being enacted. It would still have two bad effects; one, it would give government a huge windfall if it did its job properly and two, it still isn't what government should be doing with taxpayer money. But since it is going to do something with it, this seems the least harmful in the long run.

5. When the government makes money on an investment, it spend it on some pet project it couldn't get taxpayers to back. This is true at every level of government. Did you know that the Chrysler bailout in the 80s produced a $500 million windfall? No? YOu don't remember getting a check for your share? Darn right you don't. And if the government succeeds in getting this bailout to pass, and if it works, the government will get a profit that will dwarf the Chrysler windfall and make Exxon-Mobil look like a kid's lemonade stand. If the government gets these assets at .20 on the dollar, which seems likely, and they are worth .45 on the dollar, which, if the bailout is successful, also seems likely, the government will make a trillion-dollar profit. That money will not be paid out to you and me. It will instead be used to fund all the pet projects Congress can't get popular support for, like, most certainly, universal health care, among many many others. It will also lead Congress to believe that other intervention in other markets can have the same effect, and what you will get is socialism on a grand scale and the destruction of the free world. I do, in fact, predict that this is what will happen.

6. Europe is supposed to be immune to this cycle of crash and boom, because of its superior controls (read: socialism) provided by the government. Haha. Watch the news. The problems in Europe are worse, and they have no way to fight them. The EuroFed is only supposed to keep inflation in check, and has no mandate to stabilize markets. Oh, inflation is in check all right. It usually is when you have rising unemployment. The EU needs a bailout package as badly as we do, but they don't have any mechanism for getting one.

7. From a free-market perspective, the best thing to do is nothing at all, or to repeal some of the stupid regulations that contributed mightily to the current crisis. If the government will stop "rescuing" some things and not rescuing others, so that everyone knows they have to win or lose by these rules that exist right now, things will get worse very fast and better starting fairly shortly. I will lose my business, but I'm volunteering to do that if it will help convince the government to force the market to deal with its own problems. I'm not advocating some nebulous "hard time" for others; this would be my own financial ruin, despite my not having contributed in any way to the crisis. But it's the right thing and the best thing.

Instead, what we'll do is keep the comatose patient alive until all the organs fail at once and we have global meltdown and blood in the streets.

8. This brings me to the religious portion of this post, which you may skip if you don't care for that sort of thing. We know that this kind of financial meltdown is going to happen eventually. Most of us will have no idea it's happening until it's too late, which is why we are advised to be ready at all times. As the canary in the coalmine, so to speak, let me say that I do not think that this is the "big one". I think this is a head fake. It is a very clear, very obvious, somewhat painful warning that God is not kidding around when He tells us to be ready. But it is not going to be the beginning of the end. It is, however, the beginning of the beginning of the end. It is the day and a night and a day with no darkness. Right now, it's really obvious that the warnings we've been given to prepare are serious, but the signs will fade and things will go back to "normal", and we will forget, and the shock will be somewhat complete when, a few years from now, we get the three days of darkness and the tempests and the floods and the earthquakes. DO NOT FORGET. No matter what semblance of "normalcy" we get from whatever bailout passes, we must not forget. Get out of debt. Get food and water stored up. Lean on Christ and come to know Him well. Get close to the Spirit and listen to his voice. We have been warned.

And that's it for the longest post of my career. Let the comment wars begin.

Mama Dollar and Papa Dollar

At this difficult and dangerous time in the financial markets, here are some words to live by:

"Now, we can get through this thing all right, but we've got to stick together."

A few years ago I bought BaileyBuilding.com, on the supposition that one day, there might be atime when the lessons of George Bailey in It's a Wonderful Life might come in handy.  Well, here we are.

Don't lose your heads, folks.  Don't panic.  Take a deep breath, keep buying groceries, cutting your grass, and going to work on time.  The sun rises every day, and nothing we do here - much less anything the bigwigs somewhere else do - is going to change that.  Stick together.  Be kind and even generous to one another.

Pop in Wonderful Life this evening, grab a bowl of popcorn, and relax.

Sunrise, Sunset

Today is not about mortgages.  Skip it if you don't read the personal stuff.

There's a wonderful song in the musical Fiddler on the Roof that bears the same title as this blog.  On it's face, it's a wistful reminder that time moves pretty fast, and if you don't look around once in a while, you could miss it, as Ferris would say.  But it's in a minor key, and all through the song, for me, anyway, is the ache that parents feel as their children grow and leave.  It is not without joy, this process, and for us here, there is definitely more happiness than pain, but...still...

When did she get to be a beauty?  When did he grow to be so tall?  Wasn't it yesterday when they were small?

Today, in about half an hour, is the funeral of the kid next door.  He accidentally killed himself riding his motorcycle at 100mph over the Point of the Mountain, and hit the back of another vehicle.  He lingered in a coma for a few days, but then just couldn't make it.  It was his second motorcycle accident in the last two years.  He was 20.  He shouldn't even have been here.

I was bathing my little 2-year-old when I realized that that kid once took baths in my tub.  And then I was sobbing and holding my bewildered toddler.  I've been doing a lot of that this last week.

My 16-year-old and 14-year-old sons are performing in Guys and Dolls, another musical, though one without nearly as much pathos.  They've been fabulous and I've loved doing things with them.  My father is also in it, which is a joy for me (and I hope for him).  Still, I catch myself wondering when my children got old enough to play adults on stage, and watching my father and my son, knowing that a part of him has to be remembering when I was that age.  Remembering oh, so clearly.

I've written before about my problems with the passage of time, and how much I dislike it, so none of these emotions are new and unusual.  Somehow, though, this is different.  The day after Layne died in the hospital, his good friend returned from his mission.  Yesterday he spoke in church.  I do not know how our neighbors could stand it.

What words of wisdom can I give them?  How can I help to ease their way?

I'll sit in this funeral with my almost 17-year-old and cry.  I'm crying now.  What can I tell him?  That I don't want him to grow up?  But of course, that isn't true.  I want him to grow up and get married and have children, just as I did, but I still want to tuck him i bed and carry him on my shoulders and know that the worst thing he'll have to face today is a bad dream.  There are still little ones here.  But holding little Nathaniel does not make me miss little Xander any less.

So, big Xander, little Xander, here is all the advice I have.  We all go.  Sometime, we all go.  My father will go and I will not bear it well, as I know you will not when I go.  But go we will.My father, though, will go doing what he should.  I promise you, I swear on my life, I will do the same.  Please, son, please, my dearest little boy, when you go, be where you should be, doing what God asks.  You could give us no greater gift, nor do anything that would more powerfully draw the sting from your loss.  We will all go.  Please, when you go, go where we know we can find you.

But oh, don't go.

RED ALERT!

The US government has taken over FNMA/FHLMC, fired all the management, and sent financial stocks higher by 10%.

MORTGAGE INTEREST RATES DROPPED THIS MORNING. BIG DROP. Repeat. BIG DROP.

It would be well to email me. chris@thechrisjonesgroup.com. If you closed a loan in the last three months, call me. If you closed last year or the year before, at ANY time, shoot me an email with relevant data (approx. credit score, annual income, address, current interest rate and loan amount, and when I can call you), and stand by.