Foreclosure Mess

Fannie and Freddie, which are now government-run entities, announced last week that they are suspending foreclosure sales until after the holidays. Read about it here, but let's paste in one little blurb:

"Freddie Mac is on track to help three out of every five troubled borrowers with Freddie Mac-owned loans avoid foreclosure this year," Freddie Mac Chief Executive David Moffett said in a statement. "Today's announcement builds on this momentum and provides a new measure of certainty to many of these families during the holidays."

A couple of comments.

The government couldn't clean up after Katrina, how does anyone expect it to be able to clean up an economic crisis so complex that it can't even be explained, let alone understood? Prediction: this will only prolong the misery both for homeowners and taxpayers.

Note the term "avoid". Government is much better at avoiding (and helping others to avoid) than it is at achieving. What's being avoided is the inevitable. Unfortunate as it is, this is the bursting of a bubble. Some people own homes that they never could and never will be able to afford. Others bought or borrowed at the top and now owe more that their home is worth. Putting the sale off until after the New Year is simply that--putting it off.

As I predicted, now that the government runs Fannie and Freddie, feelings are being introduced into the decision process. Freddie now is the the business of "provid[ing] . . . new measure[s] of certainty" to delinquent borrowers. This is to be expected bc. where there is government involvement, there is politics, and where there is politics, feelings often become more important than sound economics.

Finally, this policy will encourage others to stop making payments. After all, if you and your neighbor both are under water and he has stopped paying but gets to stay in his house, why should you pay? There's no consequence.

Who knows, maybe it's better for everyone if delinquent borrowers are allowed just to squat where they are for a while. The banks certainly don't want the properties and vacancies only add to the downward spiral of real estate values in any neighborhood. On the other hand, moving folks out who can't afford to be where they are, and moving them out as quickly as possible, may be more humane and will certainly bring this mortgage mess to a speedier conclusion.

Sell More Cars

If you've never been, you might one day consider visiting The Rouge, a Ford factory right outside Detroit. We took the tour a couple years ago and found it to be pretty interesting.

One thing that struck me coming away from it was the museum's portrayal of the labor movement. Either the curators know that their audience is pro-labor and so cast a positive spin on the unions or they feel a need to be politically correct and make up for Ford's bashing the unions through it's history. Either way, the big push is to portray the company-union relationship now as a "Partnership". It's no longer adversarial but instead cooperative.

Which brings me to the spot in which the Big Three, the Congress, and American taxpayers now find themselves. Ought we bail out Big Auto?

The problem is that because company and union are now a Partnership, the Big Three morphed from being car companies into being jobs programs. The Partnership's goal is not to sell more cars and trucks, but to stay alive to be paid another day. Management wants to keep their jobs and the union wants to protect their jobs. The poor share holders, I'm sure, tho, would prefer that the Partnership makes a profit by selling more cars.

In their effort to stay alive, representatives of the Partnership showed up on Capitol Hill yesterday to beg Congress to allow American tax payers to become share holders.

According to the reporter on Squawk Box this morning, Ford is presently losing $400 for every car it sells. I'm sorry, but investing in a company that's doing that does not appeal to me. I'm assuming that if they sold more Fords they would be making a profit. But in the mean time, why would anybody buy stock in that company? Why? It makes no sense.

The only answer is to save the jobs. Remember my assertion that the Big Three are nothing more than jobs programs disguised as car companies. Maybe the economy is so bad that we need in the short run to protect those jobs, I don't know.

But I guarantee you this: in the long run, a car company cannot survive when it's losing $400 per unit. A government program, of course, can go on losing $400 per unit as long as the taxpayers allow it and the Treasury keeps printing increasing worthless dollars.

The question taxpayers and Congress members need to be asking is, honestly, do we want to keep this jobs program going? Do we want the Partnership to survive? Or do we want them to convert back to for-profit car companies? My guess is that giving the Big Three Partnership $25 bil. more will not cause them to sell more cars.

Barry's Bonanza

IBD does a great job here of listing all the promises that Barry's website makes to the American electorate.

Whew, it's exhilarating! And I mean that in the most sarcastic way.

I like the one about doing my taxes in five minutes, tho, I'm sure that will not apply to the 60% or so of us who actually pay income taxes. After all, how long should it take for the 40% of you who pay no income tax to fill out an application to stake a claim on a portion of my earnings. Yes, yes, we're among that five percent (shame on us) who won't be getting a tax cut.

Another fave of mine "makes" employees provide seven paid sick days a year. Isn't that how the Big Three auto workers have gotten themselves into trouble--by paying people not to work?

He's also going to "finish the fight" against al-Qaida. Do you think al-Qaida will agree to that? Maybe they'll sign a peace treaty on a carrier parked in the Persian Gulf.

"Slash earmarks"!?!?! That makes me laugh out loud. Literally. There's not a snowball's chance in hell that a bill, any bill, will make it off Capitaol Hill without being laden with pork. Congress is incapable of that.

It's quite a bonanza, Barry.

Grab your wallets, folks.

Masterpiece 6: The Peaceful Transition of Power

A friend recently attended a lecture by Vicente Fox, the former president of Mexico. When asked about corruption in Mexico or about the Mexican drug lords or some such thing, Fox pointed out that he was the first president in Mexican history who was able to stay in the country after leaving office. Fox reportedly pointed out how lucky the U.S. is to have such a history of smooth transitions of power, something that Mexico is just growing into.

Isn't that a masterpiece? We smoothly flow from Hoover to FDR, from LBJ to Nixon, from Billary to Bush, and now Bush to Obama never thinking twice how impossible that is in so much of the world.

Credit much of that to our electoral college system, some of it to a three branch system with checks and balances, and lots of it to the American culture's insistence on of the rule of law.

It's why people are still lined up all over the world to get here.

did I ever post this?

don't think I did. . . .

Seems so irrelevant now, but it still cracks me up.

My guess is that ACORN registered him to vote. Possible many times over.

The Wonder of Walmart

I got this graph from the IBD website.

What amazes me is Wal-Mart. From the accompanying article: "Wal-Mart's same-store sales rose 2.4%, beating forecasts. But comps excluding the world's No. 1 retailer fell 3.5%." Look at the top graph. Same-store sales for all stores was -.5% but take out Wal-Mart and it was -3.5%.

I've writ before about my amazement with grocery and big box stores. It's amazing the market share, the power of Wal-Mart. It does what Sears & Roebuck did in the early 20th century--provide affordable goods to the folks. That is a true service, desperately needed.

How many people have noticed that since Wal-Mart began providing four dollar generic prescriptions, Target, CVS, and Walgreens have all followed? How many people has that helped? And without any kind of government mandate.

My worry is that Barry, Nancy P, and wild man Harry Reid will legislatively force Wal-Mart to unionize. Wal-Mart is, after all, the prize for Big Labor.

It would be a shame to GM/Ford/Chrysler-ize something that this country so badly needs.

Jesse

This is the image that will always remain with me.

Granted, I can't stand the son-of-a-bitch. He's a corrupt, race-baiting hack.

At the same time, what an historic occasion. I generally assume noble intentions even with corrupt, race-baiting hacks, and though I may dislike Jesse Jackson, I can only imagine what Barry's election means to a man who has fought his whole life to see this day. How many times people must have said to him, "Not in your life time, Jesse"? Heck, how many times do you think he said that himself?

I got Jesse's picture here from the UK's Daily Mail. They ask whether Jesse's tears are from joy or from frustration that it was Barry who had accomplished what Jesse had not. Who cares? The point is, what a moment it was.

It's a New Day. The page has turned. My last hope for a McC victory was hope for the Bradley effect. It's sad to have hoped for something so distasteful. But it never happened.

History will judge whether Barry will be a good president or not. But the significance of what he accomplished is much larger than any one election or any one presidency. Good for America.

Presidential Erection

I can't vote for anything without thinking of the late great Gilda Radnor playing Emily Litella on Saturday Night Live's "Weekend Update".

"What's all this fuss about a presidential erection?" Classic.

Spent half an hour this morning looking for a clip of it on the interweb but can't find it. Maybe Santa will bring me a collection of old SNL shows that has a copy.

In the meantime, Emily Litella has her own Wikipedia page. I did find web videos on "violins on TV" and on "buying Puerto Rico a steak". Very funny.

Never mind.

Pirate Update

I guess no news is no news with the pirates. They do reportedly live the lives of American gangsta rappers enjoying the best looking women, fancy homes, new guns. Read about them here.

This is surprising to me. Surely that Russian destroyer has arrived on the scene. I thought the Russians would make examples of the Somalis. String 'em up from the yardarm. But evidently not.

Probably waiting for the Barry to be elected or for Jimmy Carter to arrive on the scene so one of them can broker a deal and save the day. (Sometimes I crack myself up.)

CC update

Circuit City shares update. Wish I'd owned them at the close yesterday. As of 3:23 this afternoon they are up 42% for the day.

Of course, that's an increase from 26 cents to 37 cents. Yikes.

CC announced today that it will close 155 stores leaving it with 566 stores still around. Cutting 17% of its workforce, renegotiating its leases. And is considering Chapter 11 after the New Year. Yikes again.