Thursday, September 30, 2010

Where will it end? Prudent states vs. Sand states vs. The Fed vs. a certain Federal Reserve Bank district east of the Hudson...

Today Meredith Whitney predicted a federal bailout of certain states prominent among them California based on the sheer magnitude of the budget gap and projected deficit. Link here to video

And Bloomberg's Bob Ivry reports that Mortgage foreclosures and seizures affected over 400 hundred thousand properties in August alone with no end in sight. Complicated by "An employee of Ally’s GMAC unit said in a December 2009 deposition that he signed thousands of foreclosure documents without verifying their accuracy. Attorneys general in Iowa, Illinois and Texas are investigating. If uncovering such deficiencies halts thousands of pending foreclosures or renders void those that have already taken place, including repossessions of homes that have been resold, it could snarl courts for years and further postpone a recovery that can’t happen until real estate prices find a bottom" link here

Yet over a year ago in an email to Charlie Rose this writer suggested S15, the name for a group of states whose citizens may rise up and STAND AGAINST any such bailout - starting with Texas may form nothing short of at least fiscal secession - then what?

Thursday, July 09, 2009

Dear Charlie-

Let me seriously suggest that a new political alliance called the S15 will arise.

The S15 is the group of US states – which have been prudent in the past and are four:
1) Seeing their constituents’ taxes increase dramatically and going to Washington / US congress.
2) only to watch Washington GIVE – sans due diligence to parties like:
a. Wall St, - the professionals who created and enabled this financial crisis.
b. Mortgage borrowers who screwed up and are banded together by investors in MBS right?
c. States like CA – which have been and are financially and politically bankrupt.
3) not going to take it anymore - watch and enable that video ok?
4) that’s Gettysburg for you and it may in fact be a much larger group of states than 15.
5) Obama – needs to sing and dance to the music of change WE can believe in – not change just a favored few can cash in on.

The recovery – rather the only form of recovery and long term deficit reduction is this.

Taxpayers are more resourceful and the best spenders of resources.
The feds should give a tax credit for FUTURE earnings as result of that taxpayer increasing their skills by spending their own moneys to obtain education and training for a NEW job. The jobs of old ARE not efficient. Education in the sciences should receive a slight preference in the tax credit – i.e. 110% of the amount that is spent to obtain same. Upon earnings from that new job – the tax credit kicks in.

Second – as I have stated in the past – real estate will truly recover NOT from bailing out those who made poor purchasing decisions in the past period. Yes, admittedly a few, not all were perhaps defrauded – they can pursue their allegations through the plaintiffs bar – the rest may have tried to defraud lenders – lenders can ad should pursue them as they always have – why should this time be any different? Why? And political expediency is a poor excuse. Real estate investors, with longer term incentives can set a floor for all markets – provided they get a tax holiday or tax credit.

Again – in summary – let the most efficient arbiters of their own resources - individual taxpayers and independent real estate investors take the risk for potential returns – do not continue to give out cash to stimulate the economy.

Thank you.

However, perhaps Arnold or his successor (Ms Whitman or Mr Brown) will as suggested by this writer first in January 2010, updated March 2010 - Sacramento will fight the Feds like a "real man":

Updated March 3, 2010

Today's NY Times quoted Mark Zandi of Moodys:- QUOTATION OF THE DAY -"If you pick almost any economic statistic -- income, house prices, construction activity -- it would tell the same story: New York has gotten hit, but it hasn't gotten creamed."- MARK ZANDI, chief economist for Moody's Economy.
Story link here:

The article reports:"Now city officials and private economists are revising their forecasts with a drastic change in tone. The gathering consensus is that the recession is nearly over in the city and, largely because of the enormous amount of federal aid poured into the big banks, the toll on New York will be much less severe than most had feared. "

Further the article goes on to state: Why has New York fared much better than many feared?Economists say the hundreds of billions in loans and aid the federal government pumped into the city’s banks fueled a quick reversal of Wall Street’s fortunes. That turnaround saved thousands of high-paying jobs and the controversial bonuses that go with them, averting a sharper drop in tax collections and consumer spending that would have brought more layoffs. “A lot of us had expected there would be 60,000 or 70,000 jobs lost directly in the financial services sector,” said James Parrott, an economist with the Fiscal Policy Institute.“Then there would have been a spillover effect,” he said, referring to the widely accepted idea that each job on Wall Street supports two others in and around the city. Instead, employment in financial companies in the city has declined by only about 30,000 jobs, and some big banks have been hiring again.

Some analysts say they think that some of the biggest banks in New York, like JPMorgan Chase and Goldman Sachs, have emerged in stronger relative positions than they held two years ago.“To some degree, the city’s financial services sector has been strengthened by the crisis,” Mr. Zandi said.“A lot of financial institutions in a lot of other parts of the country have evaporated,” he said, leaving the big New York banks to fill some of the lending void.

Through the infusions of capital into its banks, New York has been the biggest beneficiary of the federal assistance of the last two years, Mr. Zandi and other economists said.

“One could argue that no city in America got as much government help as New York City,” Mr. Zandi said.

Citigroup received $45 billion in aid. JPMorgan Chase borrowed $25 billion; Goldman Sachs and Morgan Stanley got $10 billion each.

But each gained far more from the Federal Reserve’s policy of holding interest rates at very low levels all last year, helping them to amass record annual profits.

The bailout “didn’t prevent substantial losses,” Mr. Parrott said, “but they would have been greater without it.” For a change, New Yorkers have no reason to complain about sending far more of their tax dollars to Washington than they get back, Mr. Parrott said. He said it was possible that New York recovered all of the surplus in its balance of payments to the federal government over the years. Whether or not that is true, economists agree that the course of this recession was radically altered by the federal aid the banks received. Few are ready to say that the recession is over in the city, but they expect the recovery, slow and halting as it may be, to begin soon.

Original post January 12, 2010.

FLASH - Thought to Arnold and Mr Brown - A Freeway Series?

Since tax payments are just around the corner - perhaps the G'vner asks us California-based taxpayers to send 78 cents to Fresno (the IRS tax payment center) and 22 cents to Sacramento (the CA Franchise Tax Board payment center) it could be held in the Wells Fargo vault "in trust" just like the Feds hold the Social Security Trust Fund - sure...then let the Feds duke it out with the Terminator...what fun!

Seriously ---The open letter to Arnold follows to go after the NY Fed and US Treasury to uncover the undisclosed bailout support to NY area employment in the banks, brokerage firms whose employees not only got nice paychecks all year, nice (tax-free) health care, $5B in keep-the-team-together CASH retention bonuses (paid out to the stock brokers at Merrill, Smith Barney and Morgan Stanley in February 2009) but look to CLEAN UP all that's left in the till with the upcoming record CASH bonuses. Link to story here

As has been asked for decades but remains unanswered "Where are all the customers' yachts?" and tell me again why these entities exist in the first place? To serve the public's interest, customers', shareholders' or their own or did I write out of order?

VIA FACSIMILE (916) 558-3160
Governor Arnold Schwarzenegger
State Capitol Building
Sacramento, CA 95814

Re: “Fair” Federal Funds

Dear Mr Schwarzenegger,

You have reasonably, although at risk of being unpopular, pointed out some unique-to-California burdens which a more leavened federal outlay formula can and should address.

It may sound extreme, however, you could request Attorney General Brown to join existing or initiate new litigation to force the Federal Reserve, NY Fed and US Treasury to disclose the full nature, extent, past and current extraordinary US taxpayer support provided to a narrow set of NY bank interests. Including any “kinder and gentler” financial accounting rules put forth by the SEC / FASB; which disproportionately benefit same NY Fed district member banks including GE Capital. Other states may find a compelling interest in joining this litigation.

NY Federal Reserve district member banks have and CONTINUE to receive the benefit of hundreds of billions of direct and indirect US taxpayer support. Support believed to cover their own 20, 30, 40 to 1 or more leveraged proprietary trading investments in both on and off balance sheet special purpose vehicles.

Importantly, NONE of the proprietary trading was EVER intended for their customers’ or the public’s benefit; subject to proof, it’s believed certain traders may have engaged in conversion of OTC “mark to model asset values” into their own CASH compensation.

Additionally, “almost zero cost money” from the Federal Reserve’s discount window borrowings are a hand out almost exclusively to maintain NY metro area employment, indeed are a type of pay off to consolidate market monopoly positions and retain their armies of proprietary traders.

The FDIC’s TLGP program has ALARMINGLY and secretly guaranteed debt in the amount of $313 B (not a typo) including, NON F.D.I.C insured yes correct, "NON" FDIC insured affiliates of certain banks and thrifts. A FOIA request #09-1132 seeking the identities of the above and amounts properly submitted by my office last June 2009 was denied. See email below from Mr Elmore July 2009

See link to table here

As a resident and business owner in California and fiduciary expert with emphasis in financial services compensation and profitability – I would volunteer my time to assist in pursuit of the above disclosures and identify the beneficiaries in contrast to California and other states & territories and American Indians and Native Alaskans which have not similarly benefited.

Very truly yours,

Chris McConnell, AIFA®

And my office issued FiduciaryALERTS™ annually, 1 pagers since 2004 – so not my first rodeo, and it’s not about me being right or lucky because I’m half Irish – its about recognizing the obvious. The last one July 2008 titled “Denial of Twin-flation™ is not a prudent investment strategy” Copies available.

Chris aka McFid*

* Since 2003, when you need to know exactly what a BFD looks like. Call McFid, the Fiduciary Expert. (BFD means breach of fiduciary duty.)

Copyright © Chris McConnell & Associates 2003 to 2010 All rights reserved

Copy of email below from FDIC's Mr Elmore denying my request for identities of NON FDIC insured bank and thrift affiliates' amounts of FDIC loan guarantees.

Mr. Chris McConnell
Chris McConnell and Associates
12121 Wilshire Boulevard, Suite 501
Los Angeles, California 90025
FDIC FOIA Log # 09-1132
Dear Mr. McConnell:

This will respond to your electronic mail (“email”) request dated June 24, 2009, submitted to the Federal Deposit Insurance Corporation (“FDIC”) pursuant to the provisions of the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552. In your email, you request “the names of all institutions and amounts related thereto in the May 2009 TLGP summary.”

Please be advised that the information you have requested is exempt from disclosure pursuant to Exemptions 4 and 8 of the FOIA, 5 U.S.C. § 552(b)(4) and (b)(8).
Exemption 4 of the FOIA protects "trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential." This exemption allows the withholding of confidential business information which the submitter does not customarily release to the public. Critical Mass Energy Project v. NRC, 975 F.2d 871, 879 (D.C. Cir. 1992). Exemption 4 is also available to protect governmental interests such as program effectiveness and compliance. Id. In addition, Exemption 4 protects business or financial information, the release of which is likely to inflict competitive harm upon the submitter. National Parks and Conservation Association v. Morton, 498 F.2d 765, 768 (D.C. Cir. 1974).
Exemption 8 of the FOIA protects matters that are "contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of an agency responsible for the regulation or supervision of financial institutions."
Since your request has been denied, you may appeal the denial to the FDIC’s General Counsel within 30 business days following receipt of this email. If you decide to appeal, please submit your appeal in writing to the Legal Division, FOIA/Privacy Act Group. Please refer to the FDIC log number and include any additional information that you would like the General Counsel to consider.

No fees have been assessed in connection with your request.
John F. Elmore
FOIA/Privacy Act Group, Legal Division
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Tel: 202-898-6502
Fax: 202-898-6910

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