Patrick's Rants



10/15/2007

American Dream Turns to Nightmare

Filed under: Politics — site admin @ 8:59 am

I recently returned from a trip to the Phoenix area. Along the side of the highway, I could see the skeletons of unfinished apartment complexes. There were no workers at that time of day; they may have just gone home for the day, or they might not be working that hard on them at the moment. The scene reminded me of one described in, “Inside Job”.

The camera panned slowly from side to side, catching in sickening detail the carrion of dead savings and loan deals…
The condominiums stretched as far as the camera could see, in two- and three- floor clusters, maybe 15 units per building. They were separated by stretches of arid, flat land. Many were only half-finished shells.

It goes on to describe rotting materials – a $300 million gutting of Empire Savings and Loan. Land was flipped between several people to inflate the value and then mortgage it, and then to walk away from it, leaving the S&L and eventually the American people holding the bag.

President Ronald Reagan stepped through the tall French doors of the White Hours Oval Office in to the bright sunlight of a lovely fall morning…

…Reagan told the audience of savings and loan executives, bankers, members of Congress, and journalists that they were there to take a major step toward the deregulation of America’s financial institutions…

…The result was the biggest financial disaster since the Great Depression and the biggest heist in history.

Reagan took his pen, deftly jabbing it into the heart of the Savings & Loan industry. Even though the hemorrhage pooled around his feet making his shoes sticky with each step, the writhing death rattle was ignored until after daddy Bush was elected president. Daddy removed the saber from the chest of the gasping FSLIC (Federal Savings and Loan Insurance Corporation) and lopped off its head, pausing only long enough to call in the grim reaper known as the Resolution Trust Corporation.

While Reagan moved too slowly to save the S&Ls, daddy and RTC moved quickly to finish them. Instead of admitting them to the ER, they were rushed off to the undertaker as they gasped their last breaths; institutions were taken over and their assets sold for ten cents on the dollar.

We may be heading to something similar – a perfect storm of credit – under Dubya. There have been tons of laws, court rulings, and a lase faire attitude toward what companies are doing to individuals.1

The housing market is beginning to fail. The phrase, “worst foreclosure rate since the Depression,”2 has been used a few times. In an email on one of my subscription lists, Bryan O’Neal writes, “If any one is interested in purchasing a home in the Casa Grande area we are offering some insane deals (below cost) just to dump excess inventory.” He lists pricing at around 8% below builder cost.

Now you might be thinking, “wait a minute. Lots of things happened before our esteemed leader took office.” And you would be right. But you would not be right if you thought that Dubya doesn’t have a boatload of blame. China owns the US. That’s right, they have bought our government’s IOUs. Here’s how that happened, and how it’s Dubya’s fault. First, he refused/refuses to change his mind based upon new information. He forced Congress to cut taxes; even mailing “prefund” checks to people based upon a previous tax year. He continues to stand by “tax cuts no matter what”. We (rightly) went to war in Afghanistan. Instead of asking for sacrifice from US citizens, he told them to go to Disney World3 (in Florida, promoting his brother’s state economy). Instead of war bonds, he told people to go shopping. Instead of asking us to plant a Victory Garden (presumably with ethanol or biodiesel producing crops) he told us to drive – increasing our dependency upon the same countries he sent us to war against. Instead of dropping tariffs on South American sugar for ethanol, instead of pushing the automotive industry to continue with a successful electric car4 project – that is viable today – he funded hydrogen research which will take billions of dollars and many years before it ultimately fails. Estimates are that a hydrogen car will cost approximately $1 million to purchase/produce. He told the American people to keep spending and he keeps the government spending on “tax cuts” and a “war on terror”.

The thing is interest rates here are falling. The Federal bank had to cut rates or risk massive foreclosures and bankruptcies. That has the effect of making our bonds less attractive, new bonds may not (won’t) sell as well. China won’t want our reduced return bonds and many other countries may follow suit. The value of the US dollar is falling too. Canada, Canada of all countries has reached parity with the US dollar.5 It hasn’t been that high since the double digit inflation era under Carter. Gold is heading higher too6 which can indicate that people are concerned with inflation or that they don’t trust the government paper.

With massive failures of the sub-prime mortgage companies, record foreclosures due to ARMs (Adjustable Rate Mortgage) ratcheting up and the impending sell off of US backed securities by other countries – mainly China – expect an implosion that will affect the US for at least a generation. Our government cannot pay off its debts. Clinton left office with a budget surplus – Dubya spent that the first year and it’s been a downward spiral ever since. If this is conservative we’re all in deep trouble.

  1. Bankruptcy Law Change Stories and Reviews
    bankruptcyaction.com
    Wikipedia
    bankrate.com
    Credit Card Cacophony
    Maxed Out
    Blame it on South Dakota
  2. Worst Housing Market Since the Depression
  3. Go to Disney World
  4. Who Killed the Electric Car?
  5. Loonie Bills?
  6. Gold prices

2 Comments

  1. Interesting. What cracks me up on this is the ad on the right side of the screen urging me to purchase a 46″ lcd hdtv for $1499. Hmmm, be worried? Nah, I’ll consume my way to the happy land of financial irresponsibility. And hang that bad boy up in my 4000 sq ft house that I purchased for $750k on a 5/1 ARM that expires next month. Payments? No problem. That’s what credit cards are for. I’ll worry about that when I get back from my next vacation celebrating my lay off as my job was outsourced.
    /satire

    Comment by Steve — 10/17/2007 @ 9:17 am

  2. The ads rotate – sometimes you will see the link to OpenOffice.org instead of the big screen TV… but that’s the way it goes.

    Comment by site admin — 10/17/2007 @ 9:31 am

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