Sep 24
We are now well over a year into the financial meltdown. Too many CDOs, too much crappy mortgage financing, outlandish consumer credit card debt, blah, blah, blah.
Banks have taken a little over $200 billion of TARP monies thanks to good ole’ Uncle Sam. But if you take out the top 10 TARP recipients, only $60 billion has made its way to some of the other 8,000 banks, including thousands of community banks. These banks, along with their brethren who were not fortunate enough to get money (or too proud to ask), are sitting on some dodgy assets.
First of all, many of these banks have taken significant positions in commercial and residential real estate lending, including construction and land development. While some of these loans are well secured, many are chained to a belief that America needs more housing – which we will – over a very long time.
Second, while these banks hold 1st liens on some residential properties, alarming levels of junior mortgages and home equity loans are being reported to the FDIC as “real estate” loans as well. I’m afraid that many of these loans have had the “welcome home” mat pulled out from under them. These are substantially unsecured personal loans. The 1sts will be lucky to get out whole.
Some of these loans or the liquidation of collateral will indeed work themselves out over time, but there are a number of problems in America’s smaller banks that have not seen the light of day. Let’s not prolong the agony of slow death and allow banks to hide behind their regulatory veil. Regulators should push them to get real, get out, or both.
Today, community banks get a yellow card.
BA
Sep 18
As the battle for Colorado political posts begin to take shape, we will all need to consider each candidates stance. One candidate wants “to ensure that current and future retirees can count on PERA and that taxpayers will not bear the burden of poor financial decisions made by its board and staff.” What does that mean “poor financial decisions”? So in 2008 PERA lost $11 billion on its investment strategy or a negative 26%. While maybe slightly better than other market indices, is that really representative of its constituents? Teachers, public servants. You would think they would invest more conservatively. How will they make this up? What are the actual investment goals of PERA?
Starting January 1, 2010, PERA will merge with that other sickened public platform for the Denver Public School system. Will they really be able to drive efficiency and stability through this combination?
In 2008, PERA took in $1.6 billion of contributions and paid out $2.6 billion. It seems inconceivable that PERA will be able to meet the growing demands on its resources. I don’t really believe this will be fixed without a helping hand from your fellow Colorado taxpayer. As a result, I view this as a neutral issue in next year’s elections. Look at other issues that offer choice and provide a fair toss with a two-sided coin.
BA
Sep 18
I read an op-ed in my local paper the other day that featured a letter asking that a property tax be placed on bicycles who insist to “share the road” in Colorado. Why should bicyclist be able to tap into the benefits being created by property taxes levied on vehicles? Interesting idea, although I imagine the vast majority of bicycle owners also own cars – children excluded.
As my wife and I do not have children, I have often pondered this same thought with regard to property taxes on our home. I once joked that I must be making these payments so that our community’s children will grow up educated and will not have to resort to stealing my car to make ends meet.
In the changing demographics of our society, we need to give new consideration to our taxing structures. It is hard to imagine that our traditional taxing methods (e.g. income, property, and sales) will suffice to support our infrastructures of today or in the future.
BA
Sep 18
For some time now I have wondered about the insurance industry. It strikes me as one industry that markets itself under a premise that is not their main source of financial gain. There is a logic in thinking that Ford makes its money selling cars and trucks to its customers. This is what their customers believe and this is also what their investors believe.
The insurance industry is almost the opposite. Providing a service to their customer is more of a cost-driver than an income generator. Aetna, for example, describes themselves as “one of the nation’s leading diversified health care benefits companies, serving approximately 36.5 million people with information and resources to help them make better informed decisions about their health care”. However in 2008, more than 65% of Aetna’s net income was driven by returns on its investments. It was only slightly lower in 2007.
The current debate in the US is relevant. And I would agree with the migration of the discussion from healthcare reform to health insurance reform. While both are necessary, health insurance reform can serve as a better catalyst for change.
- Individual Responsibility – We need to embrace a longer-term goal of individual responsibility. I don’t believe the role of government in healthcare should be that of “big brother”. We don’t manage our supermarkets by dictating shelf-position by nutritional value. We allow market forces and education to determine individual values about our food selections.
- Competition – Government can serve a constructive role in promoting competition. I don’t believe this is a federal mandate, however. If states can unionize themselves enough to execute a cross-border Powerball game, surely they can consider the merits of looking across state-lines to seek opportunities to create more competition and regulatory streamlining.
- Continue existing Government Options – We already offer limited government options that provide access to emergency care. These types of options should continue as part of a limited social framework. However, to introduce a system whereby the federal government offers a program designed to compete with the private sector would only further flame the criticisms of government’s role. Would they be willing to bailout a failing healthcare insurance provider because of national interest?
- Re-define Community – Society needs to re-define community and its responsibilities therein. Our founding fathers chose federalism for a reason. It remains too difficult to align and execute our interests based on a community from New York to LA. I might care about the 300 lbs. guy down the street who hasn’t taken care of himself for 40 years and becomes a diabetic. I doubt I would give much interest at all with the same guy 1,000 miles away. If he’s lucky, maybe “his” neighbor will.
Let’s work towards a longer-term solution that focuses on local communities having enough access to competition that gives each individual reasonable access to healthcare insurance if he so chooses. Let more localized communities deal with the fallout from there.
BA
