Feb 24, 2009

Cramer Nailed It - The Perfect Bank Bailout Plan
A Parody

Tonight on his CNBC show Mad Money, Cramer presented his own bailout plan that should take care of both the housing crisis and a weakened financial system.

The first step that Obama should do is to purchase preferred non-voting stock from banks that require additional cash to meet a conservative asset-to-liability ratio. These preferred would carry a low percentage of interest and would be repurchased by the bank and not converted to common. That would protect shareholders from having their investment diluted and the banks from Nationalization.

The second phase would be to offer current and new home owners a 40 year fixed-rate government backed mortgage at 4%. This would reduce mortgage payments sufficiently so that most people could afford their payment even if they currently have negative equity. This would give those home owners time to turn negative equity around, bring new life to the housing market and make home ownership available to a wider range of people.

Obama at first dismissed these ideas as just chatter from the Chattering Class. But no one can accuse Obama of not being sharp. We’ll let the banks issue newly printed preferred non-voting stock and in exchange they will get newly printed dollars. Both the newly printed dollars and the newly shares will have about the same value that would make it an even trade. Besides, when the time comes he’ll just change his mind, a politician’s prerogative, and convert those preferred and we’ll end up owning those banks for next to nothing.

The government backed mortgage program had him confused for only a moment, he soon realized that this program could achieve the pinnacle of his dreams. As long as these sponsored mortgages had an inflation clause, when the dollar tanks by the endless printing of greenbacks, almost all families in America would be living in government owned housing.

Consumer Confidence Records All-time Low
Obama Promises New Stimulus Will Finish the Pesky Index before the End of His First Term - A Parody

The New York-based Conference Board issued their monthly reading on consumer confidence at an all time low of 25, the lowest reading since the indexes start in 1967. January’s reading was an extremely low 37.4 and last February was a 76.4. The professionals that prognosticate such things saw a 35 in February and there were rumors that several of them were seen running through the halls of Congress cheering that finally there is something with a lower rating than Congress. The cheering soon ended when someone reminded the Representatives and Senators that only 12% (February’s Rasmussen Poll) of the American people think that Congress is doing a good job.

President Obama, when hearing the news, immediately called together his Cabinet of tax cheats, Lobbyists and a token Republican, rumored to be a senior Pennsylvania Senator, who together laid out a plan that will insure that the remaining 25 points left on the Index would be gone by the end of Obama’s first term. Obama wasn’t sure they could hit ZERO by the end of his first term but approved the measure anyway because he felt sure that it would work by the end of his second or third.

How Is Your 401/Retirement Plan Doing?
Because It Is Still The Largest Pool of $$ Left to Raid

The American dream is under attack; better paying jobs are being shipped overseas, our larger companies and universities are contracting out jobs to companies that import H-1B Visa holders that receive lower wages and fewer benefits, the cost of sending our children to university often requires taking out a second mortgage, a major illness can wipe out 40 years of work and saving and now our retirement funds are disappearing.

Craig M. Douglas and Tim McLaughlin penned an article about Boston’s mutual fund companies with major stakes in Citi Group. The largest holder of Citi stock, which have fallen 68% just this year, is Fidelity Investments which purchased an additional 100 million shares in the last quarter of 2008. As I read this article I thought of my previous employer that had their 401k through Fidelity and my son who also has his 401k with Fidelity. At the end of 2008 his fund had lost more than 50%.

It’s more than plausible that a majority of Americans have lost as much as 75% of their retirement. Already we have seen our steel workers retirement being taken over by the government. The auto workers who have worked 40 years building for their retirement are watching as Congress and the media demonizes them for bringing down the auto industry. Wasn’t this accomplished by an auto industry that made promises to workers then failed to provide the funding needed to fulfill those commitments?

The private sector isn’t the only part of our economy that is reeling from the obligations made to future retirees. Many communities offered lavish retirement programs to their leadership only to find themselves under a burden that they are no longer able to fund. Communities have a severe need to raise capital for human services, infrastructure repairs, police and fire services only to find that any increase in revenues are being eaten up by retirement liabilities.

Every week we pay 14% of our gross income to Social Security and Medicare; our esteemed politicians and economists have told us that both will be bankrupt in twenty years. That is if the Federal Government pays back what it has borrowed from it. There has been numerous papers written stating that the retirement age has to be moved up while benefits have to be cut if the Social Security Administration is to survive.

Even the last bastion of retirement security is being taken away from us. With property values dropping in most areas of the country, the equity that many had planned on using for their retirement has disappeared. The family home is the single largest retirement saving investment that Americans have used, that investment has also taken a 25% haircut.

All of this is happening while the government is the only part of the economy that is growing. The future demands for our tax dollars also has to grow which means that we will have less to work with. Even as our weekly checks will grow by a massive $13, the government seems to be on a consumption tax spree. Proposed increases in our taxes are in the pipeline for everything from a 50% increase in the fuel tax, a 150% increase in cigarette taxes, a massive carbine emissions tax will cause our electricity costs to increase (again), water and sewer fees will have to increase as new mandates come on line and the continuing need for school and education funding will affect our property tax.

The only answer I have is counter to the advice of our government; not to consume, not to spend and become even more conservative than I already am.