Here once again...

I'm going to pose a question.

Name one thing that our state or Federal government does well. Take a moment and really think. If your answer is anything other than spend our money, please by all means tell me what it is. I have to see this miracle of legislation.

Notice, I said "spend our money". I didn't say spend our money well, or spend it efficiently, or wisely. I simply said spend our money. Think about that. We happily pay the salaries of everyone in those giant buildings in DC, or your state capital. And what do we get back? Can the money you ever spend in taxes, ever get you anything other than a negative return?

Think about that, I said a negative return. You wouldn't happily pay on average 20% of your income to someone to invest if you had to pay a 20-30% commission would you?

You pay tax on everything. Gas, food, death, your house, and then fees for everything else. Your tax dollars go from local to state to federal coffers. Only to have a watered down portion maybe return to your state to fund whatever project is deemed critical. So just to use an example, New york in total pays 10 Billion dollars a year in taxes. This is not a real number.....so don't start bitching about facts. Out of that 10 billion, how much comes back? Right off the bat take out all of the overhead at the federal level. Whatever program gave New York the money has people that are getting paid, so they get their cut. Don't forget about oversight. Somewhere in the vast federal ranks exists a group of people who get paid to ensure that money is wisely spent. Now go down to the state and repeat the process. Now lets say congress was extra generous and set aside 2 billion dollars for New York. Out of that 2 billion how much actually gets spent on what it is intended for?

Could we not save a few bucks by keeping as much money as possible at the state level? That would mean we would have more money to go around. And it would ensure that when New York pays that 10 Billion, part of it doesn't get siphoned off to another state due to that state having a more powerful senator.

Our country was founded with strong state governments for just that purpose. The federal government should not be taking money under the guise of responsibility for something the state is set up to handle in the first place. All it becomes is an excuse to create more federal jobs and more red tape.

Medicare is the best example of this that I can see. Every state doesn't even pay the same. I think New York pays almost twice as much for medicare as most other states. How is that equitable? If all of the money that New Yorkers paid for Medicare stayed in the state, we wouldn't have these medicare balloon payments that pop up every so often forcing the state to shaft the local governments to make it up.

You may seem to get from this post that I am no fan of government. I am not, never have been, and never will be. And neither should you. You should never, ever say your government is doing a good job. They use that as a license to steal. The call it"public mandate".

My vision of government is simple. It should be run like a business. Sure it should not try to profit off the taxpayers. But a business runs smart, it seeks the best product for its dollar, and seeks to provide the best service at the lowest cost. Our government operates for profit. Don't believe me? So how come the government can vote itself a pay raise? You know, just like a board of directors? They profit from our taxes, because we pay their salary. And if you don't think they profit in other ways, then you explain to me how someone with a salary of $174,000 for what amounts to essentially a part time job (Congress gets a lot of breaks), are millionaires. Not just like 2-3 million, but 15 million and up. Lets assume that they made $174,000 a year for 20 years and paid no taxes whatsoever out of that. That amounts to 3.4 million. Where did the rest come from? They started businesses to profit from their influence, they take money from special interests, leftover money from election campaigns, they right books, get t.v appearances. All of this money is generated and made possible by the salary that we pay them.

If you don't think they do this, you are the dumbest person alive. We should pay them almost nothing, except a stipend to pay their staffs. They all like to preach about how they enjoy public service. So, serve the public. They make enough money y virtue of the advantage their position provides. If your steel mill is having problems with the EPA, are you gong to hire a lawyer down the street? Or would you hire the firm that has a partner who sits on the Senate Committee that oversees the Superfund?

In 1885 we paid congress $3,000 a year. Adjust that for inflation and see where you stand. They weren't the equivalent of millionaires back then.

Fun with Aunt Fannie and Uncle Freddie

It’s hard to find a starting place sometimes, especially when you tackle something big. Remember the “whitewater” scandal when it first broke? Nobody could make sense of it for a long time, and to this day we still don’t have any answers. When I decided to write about the mortgage crisis and the bailouts, it seemed that the more I looked, the more the different directions it started to run off in. Now depending on which news channel you watch or what newspaper or blog you read, you will have a different culprit in your mind than your neighbor. I think to date no one has really gotten it right. We have blamed banks, speculators, the SEC, shady mortgage brokers, congress, ACORN, Bush, Paulson, etc, etc.

But we may have all been misled. There is one, make that two entities that we think of as victims of this crisis. That would be the Federal National Mortgage Association, better known as Fannie Mae and the Federal Home Loan Mortgage Corporation, also known as Freddie Mac. While we seem to be just now coming to the realization that we will have to bail them out, maybe we should have started there to begin with.

American’s all showed outrage at AIG’s government funded executive compensation, but no one batted an eyelash when they announced the bonuses of the Fannie/ Freddie execs, and that was even after the government had to step in and take them over, a few years after the large accounting scandal that struck both. They must be in bed the right people.

This is an institution with a shady past of political patronage that dates back to its inception. An entity that serves two masters: congress and the shareholders. The good folks in our congress have been using Fannie and Freddie for years. If you are a legislator with a poor, urban demographic then you lean on your people at Fannie to buy and back risky mortgages in order to give back to your constituents. Or you help someone refinance their second home for more than its worth and after they pocket the cash you get a nice campaign contribution. If you think that doesn’t go on, then you are both naive and stupid. Start checking financial records.
But how could these two quasi-government institutions have wreaked so much financial havoc? Wasn’t that someone else’s fault? Maybe not if you look back into the past. Our current mortgage crisis was caused by bundled Mortgage Backed Securities (MBS). If a bank or financial institution bundles its mortgages into securities it would fall under government rules. There would be scrutiny, and if it was too risky they would have problems selling them and they would later earn a natural, capitalistic death.

The Feds have claimed that these MBS’s fall outside of regulations. That should not be case, unless they were bundled by Fannie/ Freddie. You see they are both government –sponsored enterprises. And as such, they gain the following perks: capital requirements for securities are less than half that required for private mortgage backed securities, GSE securities are eligible for unlimited investment by government insured thrifts, and Housing GSE securities fall outside the realm of having to register with the SEC.

Over the past several decades these two enterprises have been federally subsidized, and while doing so have backed the purchase of enough housing to dwarf the two largest thrifts combined mortgage portfolios. Not only that, but they used the MBS as capital to purchase and bundle more securities, and became a self-perpetuating machine. Along the way they used a sliding scale to determine the credit worthiness of the people they backed mortgages for, and bought mortgages from. Alt-A, Interest only, Negative Amortization, they backed every kind of shady deal there was, to the tune of around 1 trillion dollars. All of these loans were bundled up and sold, and the proceeds used to back and buy up more. You can see where this is going can’t you?
Funding for these two monsters skipped around the normal congressional appropriations process. Instead good friends like Chuck Schumer, added earmarks to existing bills giving more money to these failing enterprises. That alone is testimony to the power of their lobbying efforts. Remember, government funded lobbying of government. Your money at work, thanks Chuck. In 2005, Congress attempted to pass legislation forbidding GSE’s from holding portfolios of mortgages or MBS, BUT Democratic opposition shot that one down. There you can see which side they spent more money lobbying to.

Somewhere in this twisted process, we all take the hit. Now we will have to bailout the institution that we funded all along, that took taxpayer dollars, gave it to risky buyers, bundled them up and made a killing off them. The government knew about this as far back as 2003, when the accounting scandal hit after Enron. But Barney Frank publicly stated that since Fannie had fired a few people everything was okay. How much money did they give him?

So you can pick at any one of these dangling threads and see where it takes you. How far down the rabbit hole do you want to go? I traveled halfway around the internet and burned through several toner cartridges just to print out relevant material. Maybe you will to and maybe learn who is to blame for this terrible mess. I blame everyone mentioned in this post, and a few to be named later…