Brett King - Bank 2.0

Group: Finance 2.0

Can the banking industry re-engineer trust in the system?

01 Aug, 2012 19:35

I grew up in a world where a run on the ‘bank’ was never realistically going to happen. I grew up in a world where when someone wished to declare the truthfulness of their assertion they’d simply say “you can take that to the bank” or when it was a sure thing they’d say “you can bank on it!” I grew up in a world where the government ‘guaranteed’ my deposits, my cash, or my nest egg – as long as I deposited it with a recognized bank or financial institution. But that was then…this is now.

Long memories

In the 1930s and 40s in the United States after the Great Depression, there was a perception that the destruction of individualism and community banking practices in favour of cookie-cutter branch banking approaches built on efficiency, sales, and transaction banking was a risk to the stability of the banking system.   Read More. . .

Wallets, mobile wallets and hyper wallets

 [Dave Birch] Well, I think we're moving beyond the opening shots of the "wallet wars". There seems to be coalescing opinion that mobile payments by themselves are unlikely to generate the kind of revenues that get big organizations excited and that payments are merely table stakes in a much bigger game. This bigger game is about access to, and indeed control of, transactional data. So the payments have to be wrapped up in a bundle that will be attractive to the stakeholders, and attractive enough to manage lots of different kinds of transactions.

Indeed, businesses of all kinds, including big companies like Google, Microsoft and Sprint and small start-ups like GoPago and Scvngr, are hoping to profit from mobile payments — if only they can figure out what kind of system appeals to consumers and merchants.

[From The Campaign to Digitize Your Wallet Is Intensifying - NYTimes.com]

I was listening in on a webinar about this recently.  Read more…

The latest mandate from Washington ordering religious charities to offer free contraceptive services (1); the cancelling of the Keystone XL Pipeline (2); the bypass of Congressional approval for appointments to the NLRB and the CFPB (3); and most recent the semi-reversal on the contraceptive issue which included a new dictate to insurance companies (4) to take up the cost of free contraceptive services. The incumbent in the White House has made several significant political blunders for apparent political motives and gains.

 Special Interest Groups

(1)     Women’s Rights lobby and minorities

(2)     Environmentalists

(3)     Labor unions and the anti-big bank lobby

(4)     Anti-insurance company lobby (almost everyone)

While one can simply call these political maneuvers to secure the votes of specific groups of special interest, the lack of concern over constitutional freedoms is alarming. But, let’s not make this a Democrat versus Republican thing. Let’s try an experiment and look at this situation as if George Bush did similar things and the potential political backlash one would expect.

To make this little experiment credible, one cannot simply say Bush would have ordered all religious organizations to provide free contraceptive services to their employees. Everyone knows he would never do that. So, we need to get to the essence of the backlash Obama is feeling on this issue. And, that issue is; “Does the U.S. Government have the right to demand that religious organizations take actions that would be in absolute opposition to their beliefs?”  So, what if Bush took an equally aggressive step and required a national non-denominational prayer each morning in all public and private schools across the country (special interest – 78.4% of all Americans who belong to a religion in the U.S.). After all, in the Muslim world morning prayers and prayers at four other times a day is part of their society’s routine, why not ours?  Now, to avoid Establishment Clause issues in the Constitution the prayer would not be specific to any religious group’s belief, but a prayer to “God” in general. And, the prayer would be for the betterment of the nation and its people to avoid any specific favoritism of a particular group.

On one hand, our pretend dictate from Bush is a bit watered down from our President’s recent dictate on many fronts. However, just for a moment, imagine the stories on the nightly news on all major networks, think of the speeches from left leaning politicians, and the marches of 1,000 or so (made to look like 10,000 or more on the news) in multiple cities and state capitals against having every kid in school in the country praying for a stronger nation and a better life for everyone. The noise would be deafening – even though nearly 80% of the country say they belong to one religion or another. It would truly seem like more than 20% of the population had a problem with Bush’s pretend dictate.

Maybe this experiment is for not. Bush would have never demanded all school kids say a prayer each morning even if it was focused on building a stronger country and help your fellow citizens. However, if our little experiment sharpens, even in the smallest way, our desires to defend our liberties and rights, it will have been worth the time to write and for you to read.

From the media coverage you wouldn’t know that nearly a quarter of the U.S. population was just slighted by the Obama Administration. However, since this 22.2% of the population, or 77.7 million, people happen to be a religious group, it may be understandable.

In a January 20, 2012 press release from Health and Human Services, Secretary Kathleen Sebelius and the Obama administration ordered non-profit religious organizations, hospitals, charities and the like who offer insurance to their employees to include abortion, contraception and other birth control methods as part of their health plans at no cost, deductible, or co-pay.

With this move the Administration struck a blow to the heart of the Catholic religion’s, and most other religions, long-held belief of the sanctity of life and its opposition to abortion. The Church’s staunch position against abortion and contraception has been a thorn in the back side of liberals for decades. Now, it appears that Obama is ready to “play chicken” with Catholics and other religious groups in the U.S. on how far the government can intruded into the “religious freedom” arena.

Freedom of Religion has been with our country since the colonial days. It was this desire to not be dictated to by a ruler as to what type of religion one could ascribe to that brought early settlers to our shores. In 1649 the colony of Maryland followed the Rhode Island colony’s actions in 1636 concerning freedom of religion when it enacted the Maryland Toleration Act. The Act essentially created the means for Catholics to exercise their faith without prosecution, “No person or persons…shall from henceforth be any waies troubled, molested or discountenanced for or in respect of his or her religion nor in the free exercise thereof.”

As our country formed Freedom of Religion was codified in the 1^st Amendment to the Constitution. Article VI is the second mention of religion in our Constitution, which prevented the “religious test”; preventing the requirement that you must be from a specific religion in order to hold office. Overtime, these two freedoms have been challenged from those who wish to soften, re-write, or eliminate altogether the tie religious freedoms have in our country’s founding. Until now, religious liberties have held – with some slight bending now and again.

The latest challenge by the Obama Administration to force Catholic charities and other non-profit organizations associated with religion to offer all flavors of birth control up to and including abortion may just have crossed the line. Congregations across the country over the past several weekends have had the unusual call from their Bishops and Priests to speak out against what they believe to be an outright attack on their religious freedoms. They have encouraged their parishioners to oppose the move by the Administration and called on them to notify their Representatives and request that they sign on as co-sponsors to the Respect for Rights of Conscience Act (H.R. 1179).

As for the Obama Administration, this move will be embraced by a large majority of their liberal base, especially the Pro-Choice movement. So, from one perspective the political optics look good as Obama continues his re-election campaign. It would appear to us that this is a clever play by the Administration to challenge the actions of the Catholic Church while attempting to preserve “religious freedoms” in a watered down version. The Supreme Court has held that “actions” like polygamy and sacrifice, while they may very well be part of a religion, can be regulated by government. So, it may be true too that the government can prevent a religious organization from barring access to certain medical treatments.

Whatever comes of this action by the Administration is yet to be seen. The Obama Administration and liberals are betting on the fact that this move will not mobilize the Catholic base. But if it does mobilize the base, nearly one-quarter of the American population will become a formidable opponent in November. 

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“By the way, I am in this race because I care about Americans, I am not concerned about the very poor, we have a safety net there; if it needs repair, I’ll fix it. I am not concerned about the very rich, they’re doing just fine. I am concerned about the very heart of America, the 90 – 95% of American’s who right now are struggling.”

CNN’s Soledad O’Brien then went on to paraphrase Romney’s statement to fit nicely into liberal talking points, in which Romney handily took to the mat; although you won’t hear that unless you listen to the entire interview. What you will hear repeated, hundreds of times, is that the super-rich Romney is totally out of touch with the “normal working people” in this country.

In another clearly disconnected and insensitive comment, another seeker of the office was caught saying the following in response to the wife of an engineer who has not held a permanent job for three years; “I don’t know your husband’s specialty, but I can tell you there is a huge demand around the country for engineers.“ Many in the media called this comment a slap in the face to the wife of an out of work hardworking American. The only problem with that last comment is that the President made it and the press totally bypassed the opportunity to inform the public that he is out of touch and insensitive. In fact, they went on to paint those comments and his follow on offer to take her husband’s resume to a few of his buddies for review as a reason why she and others should vote for the President in the upcoming elections. We are not saying the press is biased, just selective.  

Now, we would imagine all reading this want to help those who are in need. So, let’s take inventory of what it takes to help the impoverished in the United States of America.

Let’s first start with the number of Americans who are living in poverty. According to the U.S. Census Bureau, in 2010 the United States of America had 46.2 million people living in poverty. The level which qualified as being in the ranks of the impoverished varied from a single person earning $10,458 a year to a family of nine or more making $42,156 a year.

Next, let us take a look at the amount the U.S. Government spends on poverty relief programs. According to U.S. Congressional Testimony given on April 5, 2011, the U.S. government spends, each year, $940 billion in poverty relief in the United States of America.

Now, it won’t take long for some to do the math and come to the following conclusion. $940,000,000,000 / 46,200,000 = $20,346 per person, or, $81,385 for every family of four in poverty in the United States of America.

Did our national media attempt to answer the question that you all have? Why do we continue to have poverty in the U.S.in light of the huge spending we have in this area? And, where did the $940 billion go that would lift every single impoverished person in this country to two times the threshold income level for poverty?  That conversation would be too logical, kill the debate on helping those who are less fortunate, and disallow the media the privilege of politically editing the Governor’s comments to make sure he looked like he didn’t give a damn for the poor. If you want the facts you need to dig them up yourself.

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From the dawn of our Nation’s existence there has always been a class of citizens willing to put it all on the line to seek a better life for themselves and their fellow citizens. This group started and grew businesses which produce goods and services, and provided jobs for many, fostering the growth of our nation. We refer to those people here as the Producer Class. 

From the 102 Pilgrims and crew of about 25 who left civilization in Plymouth, England in 1620 on the Mayflower for a 66 day journey across the sea, to today, finding freedom in all its forms and a better life is part of our national DNA.

The earliest of our ancestors were primarily focused on freedom of religion. Providing for their families in a world where there was no national economy made it a necessity to be a producer, just to survive. As we highlighted in our article on the First Thanksgiving, the earliest settlers initially worked “in the common” and shared the fruits of their labors. The story of the first Thanksgiving demonstrated the flaws in that approach, and the lessons learned put us on the path to prosperity. From those lessons we forged a Producer Class and a Working Class in this country that were second to none.

It took some time for our nation to find a means to restrict the Producer Class by placing taxes on their earnings to control the amount of income they earned from their efforts. In 1913 the 16^th Amendment to the Constitution made income tax a permanent reality. And, since 1913 our government has been addicted to the billions of dollars it raises by taxing the innovation and production of its citizens.

The period of the mid to late 1800s to the 16^th Amendment is marked by the creation of great things. And, those who created these things amassed enormous amounts of money in the process. The Transcontinental Railroad was built, iron and steel manufacturing came into its own, and the telegraph and the telephone debuted on the scene. Suddenly Producers with names such as Andrew Carnegie, John D. Rockefeller, and Jay Gould not only became immensely successful but equally as wealthy. These latest editions the nation’s Producer Class were referred to as “robber barons” by their enemies, due to the great wealth and power they amassed. And, ironically, the income of nonfarm workers, the Working Class, grew 75% from 1865 to 1900 and then grew another 33% by 1913. It could be said that the birth of the Working Class (middle class) was not at the hands of any political party – but those of the Producer Class.

Initially the billions from the income tax were used to fund a growing nation, and, to fight World War I. In the respite between World War I and World War II the Great Depression hit the nation hard. Our government found a way to help those in need with the billions it was taking in through the income tax.  Once World War II ended, the funds kept flowing into the government, which now had a new problem – how to allocate these funds to good use. With the nation humming along and the dollars flowing in, our nation’s politicians soon realized those dollars could be redirected and reallocated to secure votes, votes which secured their position in power.

Throughout our history the Producer Class in this country was viewed as a necessity to our nation’s success. Despite the natural urges to want their wealth and fame, those with the desire to risk everything channeled their energy into finding success in starting new businesses, innovating and producing while others realized that entering this group, with the associated risk of losing everything, was not for them. And, the peaceful and productive coexistence of the Producer Class and the Working Class became the engine for growth in our country. One without the other would result in the destruction of both. The mutual destruction of both groups was an undeniable truth most politicians understood well, until recently.

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Romney won the Florida Primary with a wide margin yesterday, beating Gingrich with 46 percent of the vote and winning the fifty (50) “winner take all” primary delegates. The price tag to win in Florida was significant no matter how you slice it. We’ve gathered the numbers on the media spend alone to give some perspective on what it takes to garner votes and ultimately win delegates in a state like Florida.

According to the Washington Post the campaigns and their Super PACs spent the following on advertising;

Gingrich Campaign Media Spend in Florida:                        $1,112,541

Pro-Gingrich Super PAC, “Winning Our Future:”                  $2,164,727

                                         Gingrich Total Media Spend     $3,277,268

Romney Campaign Media Spend in Florida:                       $ 6,723,288

Pro-Romney Super PAC, “Restore Our Future”:                  $ 8,815,227

                                       Romney Total Media Spend      $15,538,515

The Romney campaign outspent Gingrich by 4.74 times more in advertising in Florida. In contrast, the Santorum and Paul campaigns spent nothing in terms of media in Florida. So, did spending nearly 5 times as much as Newt get Mitt 5 times more votes? Here’s how that actual vote count shook out last night according to the Weekly Standard.

Romney Votes in 2012 Florida Primary:                                 771,842

Gingrich Votes in 2012 Florida Primary:                                 531,294

Santorum Votes in 2012 Florida Primary:                               222,248

Paul Votes in 2012 Florida Primary:                                        116,776

Romney received approximately 1.5 times more votes than Gingrich in the Florida Primary. The cost per vote for Romney was $20.13, and for Gingrich the cost per vote was $6.17, when we only include the cost of media in the equation. In the “winner take all” primary in Florida, Romney took all of the fifty (50) delegates, at a cost of $310,770 for each delegate.

To win the Republican Nomination for President a candidate must accumulate 1,144 delegates of the 2,286 delegates available at the convention to be held this August. If we use the Florida Primary results as a benchmark it will cost Romney in media spend alone $355,521,223 to win the 1,144 delegates and the nomination.

According to CBS the Republican delegate score card after Florida is as follows:

Romney               69 Delegates

Gingrich               23 Delegates

Santorum            13 Delegates

Paul                       3 Delegates

Huntsman             2 Delegates

Republicans should be thankful they have a very well-off front-runner in the race. It appears Romney will need a small fortune just to get through the Convention in August. Then the real contest begins, where he will face the enormous mound of cash estimated at $1 billion that President Obama has at his disposal.

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When we think through how many times we are required to produce a photo ID in our day-to-day activities, it becomes common place.  Here’s just a quick list of the things we can recall that require us to offer up an ID in order to get goods, services and other day-to-day necessities:

• Get a loan
• Settle a real estate transaction
• Pick up certain prescription drugs
• Obtain health insurance
• Check into a hospital for surgery
• Renting a car or apartment
• Entering public office buildings
• Fly on a commercial flight
• Buy liquor and cigarettes

And the list goes on and on.

So, we are a bit amazed that the Justice Department is striking down voter ID laws in states like South Carolina. After all, the law simply states that someone wishing to vote produce a photo ID at the time they wish to vote to have their vote counted. The Justice Department is claiming that the requirement to provide an ID is discriminatory and prevents minorities from access to voting. Many liberal groups have made similar claims that conservatives are attempting to tamp down the minority vote, which typically votes Democratic. So, to some this is simply another form of racism. And, the Justice Department is hanging its hat on that fact using the 1965 Voting Rights Act, which requires the Federal Government to “pre-clear," or approve, changes to voting laws in South Carolina and other mostly Southeastern states with histories of discriminating against minorities. To be fair, 40, 50, and 60+ years ago discrimination existed in the open.

However, if the premise that requiring an ID is a form of discrimination is to hold true, one would have to return to the list we provided above. Do banks, real estate markets, pharmacies, hospitals, airlines, car rental companies, apartment owners and retailers discriminate against minorities as well? The answer is, of course they do not. 

According to the National Conference of State Legislatures, there are eight states that have Strict Photo ID requirements. Meaning, that voters must present a photo ID to vote, otherwise they cast a provisional ballot which will be counted if they return with a photo ID within a specified period. There are seven states that have a Photo ID requirement. Meaning, voters are asked to provide a photo ID, and if they cannot they can prove their identity through other means.  And, there are sixteen states which require Non-Photo ID. Meaning, voters can prove their identity through a variety of means including presenting utility bills with the voter’s name and address on them.  So, 31 of the 50 states require some form of voter ID to gain access to the polls.

On January 26, 2012, the Justice Department denied South Carolina’s request for pre-clearance of their Strict Photo ID requirement, citing that state’s minority voters are 20 percent more likely than white voters to not have a photo ID that meets the standard set for voting. South Carolina is appealing. The Justice Department has yet to rule on the Texas request for pre-clearance of their Strict Photo ID requirement.

The public overwhelmingly supports some form of voter ID requirements. In a U.S. News and World report they cite a 2010 Rasmussen poll that shows support across party lines for voter ID laws with 85 percent of Republicans, 77 percent of “non-affiliated” voters (Independents), and 63 percent of Democrats in favor of voter ID requirements.

While no reasonable person would want to deny another Citizen their right to vote, the opposite must be true as well. No reasonable person would want their vote negated by someone who is not a Citizen or someone who is committing voter fraud. The American people appear to understand this. So, rather than trying to strike down laws which make us produce no more documents than if we were going to fly on a commercial flight to vote, we should be focusing on outreach programs to ensure IDs are properly and widely distributed to all.

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George Washington discovered he had been elected the first President of the United States on April 6, 1789 via a proclamation delivered to Mount Vernon on April 14, 1789, by Charles Thomson, Secretary of Congress. Washington’s written response to his election as President was:

“To the Honorable John Langdon, President pro tempore of the Senate of the United States.

SIR: I had the honor to receive your official communication, by the hand of Mr. Secretary Thomson about 1 o’clock this day. Having concluded to obey that important and flattering call of my country, and having been impressed with an idea of expediency of my being with Congress at as early period as possible, I propose to commence my journey on Thursday morning, which will be the day after to-morrow.

I have the honor to be, with sentiments of esteem, sir, your most obedient servant, Go WASHINGTON.”

That burden Washington assumed included stitching together a country of individuals who sought religious freedom and the ability to pursue, to the best their abilities, a future for their families away from a  tyranny which sought to dictate their religious practices while overseeing their day-to-day existence.  

From the perspective of 2012 one first has to marvel at the 7-8 days it took for Washington to discover he had been elected “President”.  You may also marvel at how Washington viewed the success of our country 223 years ago.

Washington’s first Inaugural Speech was given on April 30, 1789 in New York. In this speech, Washington stated, “…it would be peculiarly improper to omit in this first official act my fervent supplications to that Almighty Being who rules over the universe, who presides in the councils of nations…”

He identifies the principles that will guide him in setting our national policy. “I behold the surest pledges that as on one side no local prejudices or attachments, no separate views nor party animosities, will misdirect the comprehensive and equal eye which ought to watch over this great assemblage of communities and interests, so, on another, that the foundation of our national policy will be laid in the pure and immutable principles of private morality, and the pre-eminence of free government be exemplified by all the attributes which can win the affections of its citizens and command the respect of the world.”

He transitions the national policy to the people. “I dwell on this prospect with every satisfaction which an ardent love for my country can inspire, since there is no truth more thoroughly established than that there exists in the economy and course of nature an indissoluble union between virtue and happiness; between duty and advantage; between the genuine maxims of an honest and magnanimous policy and the solid rewards of public prosperity and felicity; since we ought to be no less persuaded that the propitious smiles of Heaven can never be expected on a nation that disregards the eternal rules of order and right which Heaven itself has ordained; and since the preservation of the sacred fire of liberty and the destiny of the republican model of government are justly considered, perhaps as deeply, as finally, staked on the experiment intrusted to the hands of the American people.”

Washington creates basic connections for the people to ensure the integrity of our republic. Honesty and virtue in the individual derives personal happiness and fulfilling your duty to country and family is directly connected to the “advantage” you reap. It would appear that Washington believed these were rewards for the actions of individuals – not given rights simply for existing.

Source for quotes and letters: Messages and Papers of the Presidents, Volume 1, copyright 1897.

It was widely reported this week that Newt Gingrich, who has been all over his opponent Romney to show transparency in his tax returns and how he made a living, has not disclosed how or who paid him in 2010. In a Washington Post story Gingrich is credited with releasing his 2010 taxes and disclosing that he made $2.4 million in 2010 with over three-quarters of that amount coming from regular payments from a holding company Gingrich runs. The holding company is responsible for managing speaking engagements, appearance fees, consulting work and book and video deals. However, Newt does not disclose who paid him. And, in a response to an AP request for more information on Newt’s sources of income, his campaign stated they were not sure if they will release this information.  

B.S. – Romney and Santorum have made details available on where their income came from. This was Newt’s challenge to Romney, which now appears to be more difficult for him to comply with than it was for his opponents. Is this a sign of the erratic Newt everyone has been waiting to see?

The news wires have been alive with the fact that Mitt Romney is paying an extremely low rate of taxes on his $23.6 million in 2010 income, which came almost entirely from investments. The topic even made it into the State of the Union address where the President provided even more support for the story, which neatly fits into his 99% versus 1% unity campaign for the country. Read the Forbes report on the Romney tax release, and then read the New York Times story on the same subject. Then make your own mind up on the level of bias in either report.

B.S. – Newsflash! EVERYONE pays 15% tax on their capital gains. Has any news source or reporter mentioned that fact to you in any of the reports you’ve read, heard, or watched in the past week?  If they have – continue to utilize those sources since they have decided to tell the whole story. If they have not, they likely have another purpose in reporting selected information.  What is missed in the attempts to paint Romney as someone who has “gamed the system” are a few critical points; in order to have capital gains, one would have had to earn the money invested (which is taxed as “income” at higher rates), then one would have to take the taxed income and invest some for their benefit. When they earn a profit on that investment, which is not guaranteed, they get taxed again at the 15% capital gains level. Let’s take the ‘left of center’ position on this and start taxing the retired persons’ investments at whatever rate you want 20 – 30% or more. Does that sound fair to you? The ‘have and have not warfare’ has no place in this election, or in a free society. 

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As defined in the Merriam Webster Online Dictionary;

Jealousy – 1 : an unhappy or angry feeling of wanting to have what someone else has [noncount] ▪ professional jealousy [=resentment of the success of someone who is in the same profession as you] [count] ▪ petty jealousies among political rivals

Greed –a selfish desire to have more of something (especially money)
▪ He was a ruthless businessman, motivated by naked ambition and greed. ▪ corporate greed — sometimes + for ▪ He made no effort to conceal his greed for money and power.

Fair –2 : treating people in a way that does not favor some over others
▪ He is known as a very fair man. ▪ I try to be fair to/with my children. ▪ He claims that the competition wasn’t fair. ▪ It’s not fair that she gets to leave early and I don’t. ▪ Sometimes life isn’t fair. ▪ a fair and impartial jury ▪ a bargain/deal/trade that is fair to/for everyone ▪ All she wants is a fair chance. [=the same chance everyone else gets]

In our times, especially in the year of a major election within the U.S., these three words have become central in the political lexicon. While the words jealousy and greed are not used often, they are the emotional basis for the use of the word “fair”. Meaning, the use of the word “fair”, as it is often repeated today in political discourse, is meant to stimulate in us the desires and emotions of jealousy and greed, and a feeling that we “deserve” more than we are currently getting.  And, “more” in a country that is built on wanting and gaining “more” of everything is a very powerful desire to stimulate.

However, stimulating jealousy and greed with the concept of “fair” is a slippery slope.  Defining what is “fair” is usually left to the instigator in a world that is too busy to enjoin the facts with the rhetoric. And, it is the lack of facts in the conversation that allows the emotions of a country to be played upon in ways that are very destructive.

From the dawn of recorded history people have always been jealous of those for whom they perceive have a better life than their own lot, whether it be money, love or any other “lot” you would like to define. So, the ability to trigger this emotion is woven into our DNA – it is always there – just give it a try. For those of a religious bent that is why one of the Ten Commandments (#10) warned us off of this easy to manipulate emotion.

So, if we formed a group of 100 people and we all agreed to work together and accomplish what we could and share some of our earnings with each other to provide for the general maintenance of our little group, we would all expect that to be fair, right? However, what if the following were the results of our “sharing”? 1 person out of the group paid 37% of the total to fund the group’s general spending. Additionally, 4 people paid another 22% of the total. And, yet another 5 people provided 12% of the total spending.  At this point, 10 out of 100 people are covering 72% of the total spending in our group. 15 more people provide an additional 17% of the total cost for our group. We now have 25 people out of 100 providing funding for 89% of the total cost our group’s expenses. Is that fair? I guess we can all define fair. But, that is how our Federal Tax system works. One could easily argue that the 25 people are doing more than their fair-share to support the group. It is only when we add jealousy and greed into the equation can one argue that we ought to take more from this group to fund our group’s expenses.

Our national conversation on the topic of fair-share when it comes to income taxes has been turned upside down and panders to the lowest of our emotions. In doing so, this incites divisions where there should be unity.

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Possibly like you, we spent 65 minutes of our evening watching the State of the Union Address by President Obama. If you read our last article we focused on the last 3 Addresses the President made in his annual meeting with Congress and the American people. In those 3 Addresses he averaged 16 proposals or initiatives. Last night, the President announced 38 proposals or initiatives. Here is the list for your review:

1. Reform the tax code to penalize companies that outsource jobs

2. Every American should pay their fair share in taxes | All pay a basic minimum tax

3. Give manufacturers big tax cuts | Give high-tech manufacturers even a larger tax cut

4. Propose a Trade Enforcement Unit charged with investigating unfair trade practices

5. Commit to train 2 million Americans with the skills that will lead directly to a job

6. Make community colleges “community career centers”

7. Give schools incentives to pay teachers that perform and remove those who do not

8. Require all states to require students to stay in high school until they graduate or reach 18 years old

9. Congress should stop the interest rate increase on student loans from doubling in July

10. Extend tuition tax credits

11. Support students by doubling the number of work study jobs in the next 5 years

12. Put higher education on notice – become more efficient – lower costs – or lose government support

13. Immigration reform | keep foreign nationals that graduate in America to create jobs

14. Women should earn equal pay for equal work

15. Pass tax relief and provide support for entrepreneurs

16. Support for innovation and research

17. Exploit our 100 year supply of natural gas in America and create 600,000 jobs in the decade

18. Create subsidies for wind, solar, and battery technology | Stop oil company subsidies

19. Support clean energy off of public lands which will power 3 million homes

20. Help manufacturers eliminate energy waste by $100 billion over the next decade

21. Rebuild America’s infrastructure | Use the savings from the wars to rebuild America

22. Proposed $3000 savings for homeowners through refinance, charge banks to pay for it

23. No more bailouts, handouts or cop outs – smart regulations to prevent irresponsible behavior

24. Eliminate outdated regulations | Already found 500 reforms saving $10 billion over next 5 years

25. Regulate health insurance companies for fairness in premiums and prevent cancellation of policies

26. Ensure that banks are not allowed to take risks with other peoples’ money

27. Create a new Financial Crimes Unit

28. Make permanent the payroll tax relief on 160 million Americans

29. Cut the deficit by $1 trillion by taxing the wealthiest 2% of Americans (capital gains tax)

30. Medicaid and Medicare reform in exchange for taxes on the rich (30% tax rate earners $1 million+)

31. Ban on insider trading by members of Congress | Limit stock ownership of members of Congress

32. Bundlers of campaign contributions cannot lobby members of Congress

33. Called on Senate to pass a rule to have an up or down vote on nominations within 90 days

34. 23,000 more troops home from Afghanistan by the end of summer

35. America will take no option off the table in preventing Iran from getting a nuclear weapon

36. Administration’s iron-clad commitment to Israel

37. Secure the Country from cyber threat

38. Veterans Jobs Corp

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On the eve of the President’s 2012 State of the Union Address we went back and summarized the initiatives discussed in the three prior Addresses to Congress. All Presidents use these Addresses to lay out their agenda of what they “want” and often not what they actually “get” or “achieve”. The inventory of ideas may be interesting to have this evening as you watch President Obama’s Address. Enjoy tonight’s Address.

 The President’s Address to Congress in 2009 was not an official State of the Union since he had just been elected. The Address was given on March 5, 2009, contained 5,902 words, and the following initiatives:

1. A new lending fund to jump start lending to households and businesses

2. Launch a housing plan to help people avoid foreclosures

3. Initiate funding to support banks, Troubled Asset Relief Program (TARP)

4. Request Congress to approve Financial Regulatory Reform (Dodd-Frank)

5. Address our dependency on oil | Double our supply of renewable energy in 3 years

6. Cap carbon pollution

7. Address the high cost of health care (Affordable Healthcare Act)

8. Fix schools to prepare the next generation to compete

9. Review budget eliminate wasteful programs | Already identified $2 Trillion in 10 years

10. Tax the wealthy to pay for reforms and programs

11. End the war in Iraq responsibly

12. Get his budget passed

The President’s first official State of the Union was on January 27, 2010. This Address contained 7,075 words, and the following initiatives:

1. $30 billion fund to help community banks stimulate small business lending

2. Small business tax credit | Eliminate capital gains on small businesses |Tax incentives for small business investments

3. Start building a new high speed rail infrastructure

4. Requested the Senate to pass the jobs bill already passed by the House

5. Requested Congress for Financial Regulatory Reform

6. More investment in alternative energy

7. Passing a comprehensive clean energy and climate bill

8. Double exports in five years | Increase in 2 million more jobs (National Export Initiative)

9. Elementary and Secondary Education Act to reform schools in all fifty states

10. Take student loan origination out of the private sector to a government run program

11. National Health Care Bill

12. Freeze government spending to pay for the $1 Trillion spent on the recovery initiatives

13. Review budget to eliminate waste | Already identified $20 billion for next year

14. Called for a bipartisan Fiscal Commission to find ways to cut spending

15. Called on Congress for earmark reform

16. Increased support to Afghanistan so they can take charge in July 2011

17. Committed to remove combat troops from Iraq by August 2010

18. Renewed focus on civil rights with more enforcement efforts

The President’s second official State of the Union was on January 25, 2011. This Address contained 6,789 words, and the following initiatives:

1. Eliminate billions of dollars of tax breaks for oil companies

2. Set a goal that 80% of America’s electricity will come from clean energy by 2035

3. “Race to the Top” education reform – government funding for schools which perform

4. Make permanent the tuition tax credit worth $10,000 for four years

5. Goal to have highest percentage of college graduates in the world by decade end

6. Prepared to work with Democrats and Republicans on immigration reform

7. “Redouble” efforts to improve the nation’s infrastructure (roads, bridges..)

8. Give 80% of Americans within 25 years access to high-speed rail service

9. Within next 5 years deploy next generation high speed wireless coverage to 98% of all Americans

10. Simplify the tax code and eliminate loopholes

11. Doubling exports by 2014

12. Ordered a review of government regulation to ease the burden on business

13. Administration is open to improving the health care bill

14. A freeze on domestic spending generating $400 billion in savings over the next 10 years

15. Find a bipartisan answer to preserve Social Security for future generations

16. Ensure that millionaires pay their fair share

17. Reorganize the federal government for more efficiency and less cost

18. Reaffirmed removing troops from Afghanistan by July of 2011

19. Called upon colleges and universities to allow military recruiters and ROTC on all campuses

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What lessons does Newt’s nearly 14 percentage point romp of Romney in the South Carolina primary have in it for the electorate and for the candidates? What was reported to be a neck and neck race turned out to be a runaway victory for Newt last week; Gingrich won nearly every demographic – including women in South Carolina. Despite the attempt by ABC to torpedo his candidacy with the “open marriage” claim by his second ex-wife, Gingrich has redefined turning lemons into lemonade. But did he do this all on his own, or is there another lesson in his strong showing?

For the Republicans this has been yet another election where the Party has assembled what many would call a not so stellar field to compete for the nomination. While this election has been called the “most important in our lifetime” the team fielded is not seen as one worthy of the phrase. Reflecting on prior attempts, McCain is still fresh with many Republicans’ memories as they recall a nominee who refused to go on offense during the general election in 2008.  His lack of offense was coupled with his novel choice of Palin as his running mate. A choice, had it been managed properly, had the potential to be a positive rather than what it turned out to be. And, a reflection back on the Bob Dole nomination in 1996, shows us that almost as soon as he was crowned “the nominee”, most realized that they had just honored an elder statesman while handing the election to Clinton for a second term – despite Clinton’s truck load of baggage going into the election.

This might just be the most important election of our lifetime. It might be the one where the electorate actually drives the results versus the press leading the votes to the voting booth. Gingrich’s total shredding of CNN’s John King and his prior “calling it like it is” approach has activated a segment of the Republican electorate that has long remained dormant. With the assistance of the abundant evidence of bias in the media, many have written off conservative views as disconnected with reality. Gingrich has proven his ability to restore what conservatives believe to be the sanity in the conversation, versus the rhetoric of repeating a position whether true or not in the hope that the masses, after hearing it enough, will believe it to be true.

Conservatives have been the victim of their own missteps on the main stage of politics. Many have opted for the spin of mistruths leading them and their followers to play to the depths of despair that their opponents have taken to. Some, oblivious to reality, have marched forward with blinders on thinking that they too can resurrect an America that they have long lost. While yet others in the Republican ranks believe that everyone wants to be a business leader and “own their job”. And, a few, like Gingrich, believe their intellect and ego will lead the Republicans to victory.

It is the huge ego that most Republicans fear in Gingrich. While clearly the most articulate, and quite possibly the most intelligent, Gingrich’s past provides us with an all too clear pattern of an enlarged ego that knows no boundaries.  Romney’s all but assumed nomination (to him at least) has either lead him to the conclusion that he does not have to play at the level of Newt, or, that Newt does not matter. Now that he and Newt both share a primary victory maybe we’ll see the Mitt that can take on Newt (and therefore his ultimate opponent). If not, Newt will have taught a lesson to Mitt and the rest of the Republican electorate. Being smart, articulate, and knowing how to go on the offense are required skills in this election cycle.

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We’ve scanned the comments of the candidates and the articles, documentaries, and stories produced by the media recently and identified the following political ‘B.S.’ for your consideration.

MSNBC took on President Obama Thursday by highlighting the fact that his top bundlers – people who gather campaign contributions of up to $2,500 and then combine them into bundles of up to $50,000 – $500,000 – get special access. Their article disclosed the astounding fact that bundlers have more access and privileges than the middle class voters he and his party purport to be the sole champion of.

BS: Does this really surprise anyone? People don’t give huge campaign contributions to be ignored. And, those smart enough to gather contributions into one big “bundle” of checks have always been one step closer to being called “Ambassador” than the rest of us. This is equally a Republican and a Democratic trait.

Last night ABC investigative reporter Brian Ross “broke” a 13 year old news story in which the ex-wife of Newt Gingrich claimed he asked for an “open marriage” to pursue a relationship with his now wife Callista Bisek. On the same night, CNN couldn’t resist the apparent blood in the water and opened their CNN Presidential Debate with a direct question to Gingrich asking him if he would like to respond to the story. Gingrich told CNN’s chief national reporter John King, “No, but I will.” And to the cheers of the crowd he took on Mr. King. We paraphrase – Anyone who can take the pain of an ex-wife and make this an issue 2 days before a presidential primary is despicable. Mr. King attempted to position Newt’s ex-wife’s recall of events from 13 years ago as open issue, to which he was once again taken to task by Gingrich. Gingrich denied the accusation from his ex-wife who has claimed before that she could end his career with one interview.

BS: A personal event from 13 years ago, which has been vetted in public and which Mr. Gingrich has already admitted publically and apologized for, is not news. It could appear to be an attempt to smear a candidate that possibly ABC and CNN are concerned about.

MSNBC took on Mitt Romney for covering up, or not stopping, an alleged rebate scandal in 2002 between the Marriott Corporation and its franchisees when he served on the board of Marriott. The article essentially painted Romney as an insider who allowed Marriott to rip off their franchisees – as all ‘fat cats’ do, right? The article concludes with a summary of contributions made by top Marriott executives to the Romney campaign.

BS: This story was 10 years old. Do a search on the internet and it appears this story died a death by silence. If you find something on your own search, let us know.

Last night Newt was called out on the tax return issue. Recall Newt made an issue of Romney releasing his tax returns on several occasions. Gingrich’s campaign made a big deal of announcing that he was going to release his tax returns on Thursday. Come to find out Newt’s big disclosure this week was to release only his 2010 tax returns! When called on the carpet by Greta Van Susteren of Fox News to produce multiple years of returns, as he requested of Romney, Gingrich said he would make his mind up when he will release the rest. His 2010 tax returns showed that he and his wife Callista earned $3.1 million and paid $994,708 in Federal income taxes.

There has been plenty of rhetoric over the Keystone XL Pipeline. Here are the facts for you to make your own decision.

What is it? The Keystone XL Pipeline is a 1,661 mile pipeline that will cost $13 billion to build and deliver daily an estimated 700,000 barrels of tar-sands oil from Alberta, Canada to U.S. Gulf Coast refineries.  The 700,000 barrels represent 41% of the daily volume of oil the U.S. imports from the Persian Gulf, 14% of the oil imported from OPEC countries, and 6% of all oil imported by the U.S.  What is tar-sands oil? Follow this link to learn more.

What is the approval process? Since the pipeline crosses the international border between the U.S. and Canada the State Department has the approving authority. The original application for the pipeline was received by the State Department on September 19, 2008. In August 2010 the State Department issued a final and complimentary Environmental Impact Statement. Most thought the approval for the pipeline was a done deal. In November 2010 thousands of environmental protesters came to Washington and formed a ring around the White House. Environmentalists threatened to pull their grassroots support from the President’s 2012 reelection if the administration approved the pipeline. Hearings in the states where the pipeline was planned to go through turned up resident concerns in Nebraska. A week after the November protest at the White House the State Department ordered a new route for the pipeline. The reroute effectively moved the pipeline decision to after the 2012 elections. During the Democrats’ and Republicans’ theater on the payroll tax suspension extension at the end of the year House Republicans attached a clause which forced the administration to make a decision on the pipeline by February 21, 2012. President Obama vowed to veto any such move. He did not, and the payroll tax suspension extension passed. On Wednesday, January 18th, the State Department denied the application for the Keystone Pipeline in a statement which opened with; “Today, the Department of State recommended to President Obama that the presidential permit for the proposed Keystone XL Pipeline be denied and, that at this time, the TransCanada Keystone XL Pipeline be determined not to serve the national interest.” Later that day, the President issued a statement announcing the State Department final decision and included, that the “rushed and arbitrary date insisted on by Congressional Republicans” prevented a full assessment of the environmental impact, officially killing the application made back in September 2008.

What is the impact of the decision to deny Keystone? A study by the Perryman Group on the pipeline identified that states along the pipeline route are expected to receive $5.2 billion in property taxes during the operating life of the pipeline. The pipeline project is expected to directly create more than 20,000 high-wage jobs across the U.S.  When the pipeline was scheduled to come on-line in 2013 the 700,000 barrels of oil would have reduced the U.S. dependence on Persian Gulf oil by 41%.

What are the environmentalist concerns? The extraction of tar-sands oil is more damaging to the environment and emits more greenhouse gases than the process of obtaining conventional oil. They are also concerned about pipeline leaks, which would potentially damage areas like Nebraska’s Ogallala aquifer, which supplies drinking water to 1.5 million people.

How often do pipelines fail? The Association of Oil Pipelines states spills along hazardous liquid pipeline rights-of-way are 0.8 incidents per thousand miles. This would mean Keystone would expect 1.3 incidents per year. According to TransCanada, the company constructing and managing the pipeline, all pipelines are monitored 24 hours a day allowing for a shutdown of a pipeline within minutes of a leak being detected. Presently, there are approximately 200,000 miles of pipeline moving oil and other energy material in the U.S. alone.

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The “Occupy” movement has arrived in Washington.  To our surprise, at least some of their complaints are valid – like being upset about the housing crisis. However, it appears the ”Movement’s” understanding of the housing crisis is flawed. That’s too bad, since fixing the issues that created the housing crisis is something the Tea Party and the Occupy Movements could agree on.

One report captured the Occupy protestor’s complaint as, “The cozy relationship between big business and lawmakers in the U.S. led to a complete lack of oversight as Wall Street ran amok, bringing about the financial crisis of 2008. The ensuing chaos affected not only Americans, but the whole world.”

We shouldn’t blame the protesters for not understanding what created the crisis. After all, at least half of Congress is doing everything in their power to mask the truth that it was their own policies that created the mess.  Those “officials” continue to disseminate disinformation. Once you whip the protesters up with income inequality and big business influence disinformation, politicians can then co-op their movement to make the flawed case to the rest of us that 99% of American’s are truly upset about inequality.

Will the facts come to light in time to allow groups like the Tea Party and the Occupy Movement to come together and fix the issues they are both upset about? To accomplish this would require a great deal of effort, and honesty. However, we have faith that it can be done. The facts are the facts – and they are not too difficult to understand.

Affordable Housing has been the term used for our government’s intervention into the housing market, which began in the 1970s. In the early days, affordable housing was an effort to eliminate discriminatory practices in lending and access to credit – a good thing.

Once lawmakers realized they could take tax dollars and offer subsidized, guaranteed loans to low-income “voters” they grew the program. Soon they realized there were more voters who would like subsidized, guaranteed home loans. So began the escalation of the government’s involvement in what would become the housing crisis. According to a CBO report to Congress, “…in 2009 the two GSEs (Freddie Mac and Fannie Mae) owned or guaranteed roughly half of all outstanding mortgages in the United States (including a significant share of subprime mortgages), and they financed three-quarters of new mortgages originated that year.”

The government fueled the housing market with as much lending as it could afford – and that was a lot. Nearly anyone who applied received a mortgage. Housing prices escalated rapidly. The more prices went up, the more people wanted to buy houses, which lead to ridiculous returns on real estate, to the point where it couldn’t be sustained.  

The U.S. Government guarantee on these home loans made them as good as gold. So everybody bought mortgage-backed securities. Until one day when we had the “Emperor Has No Clothes On” moment; housing prices had escalated beyond what they were truly worth, a great deal of those loans were made to people would couldn’t afford them, and, the housing crash that our government created began.

So, let’s protest our government’s complicity in creating the crisis. Let’s work to get government out of the housing market and other private sectors. If the Occupy Movement wants to fix the problem, they have finally come to right place. Now, let’s protest for the right reason.

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The response to our Friday article, “Truth and Honesty” restored our faith in the American electorate. Many of you agreed there is a lack of personal responsibility in our representatives, leading to our current political discourse. In reflecting on the responses we are given hope that maybe we do deserve a better functioning government, political discourse, and society.

One comment caused us to consider a deeper meaning to our current situation. While it is easy to get caught up in the political theater between the left and the right, the lesson contained in this reader’s feedback provided us greater insight into the society we deserve.

Growing up I had an interest in the world we watched through the little square box. I distinctly remember the CBS Nightly News with Walter Cronkite, which always seemed to start with the casualty count of the Vietnam War and ended with “…and that’s the way it is”.

It was the reference to the Vietnam War in our reader’s comments that caused us to reflect. The reference was to an op-ed written by Larry Pressler in The New York Times in May of 2010. The op-ed discussed the scandal of Richard Blumenthal’s, Connecticut’s then Attorney General, claim of his Vietnam War experience and therefore his military credentials in his bid for the U.S. Senate. In fact, Blumenthal never served in Vietnam and obtained at least five deferments from 1965 – 1970 taking repeated steps to ensure he didn’t serve in the war he now saw as important to his political career.

Pressler draws a connection between the Blumenthal incident, the Vietnam War and the dishonesty and lack of truthfulness we find in our society and politics today. His premise is that during the Vietnam War our government and society helped many find “legal” ways to avoid their duty to their country as it related to the military draft. In a sense, we made it O.K. to avoid duty, responsibility and in the process personal honesty. Those same people who avoided responsibility during the Vietnam Era applied those lessons learned as they took charge in industry, politics, and our educational institutions. And, there began a fundamental change in our society. Later, those same grey-haired executives taught the next generation the skills of less than truthful ways to ascend in society and politics. And, the rest is history.

While we are not here to refute or support Pressler’s conclusions, we do think his theory is plausible and potentially answers the questions many ask concerning how our politics and society in general could be so skewed. It is also interesting to consider that anyone in their late 30s and early 40s and younger won’t even connect with this potentially massive inflection point in our society. For them, things quite possibly seem “normal”. And, that feeds into the core of the political and societal discourse we live in today.

So what? What does knowing about the inflection point in our society’s character do to fix the results of less than honest dealings? The answer to that question could be ‘nothing’. We might just accept things as they are, as too big to change, and knowing where it all came from is, ‘nice to know’ trivia. Alternatively, the answer could be ‘everything’. Maybe being aware allows us to act in small ways to change. We can email a member of Congress who engages in mistruths and express our disapproval. We can ensure our own actions don’t perpetuate the same behavior we disagree with in others. We can use our power at the ballot box to place honest people of like values in office.  Those are small things, but together, they form the fabric of our society. In the end, we get the politics, government and society we deserve. 

Maybe we are just a bit too naïve. However, the truth at one point in our recent history was not some elusive concept that people hoped for. You knew it – and you respected it – because it was important to your personal reputation in society. At one point in the past there was a line which people of respect didn’t cross for any type of gain. 

Politics is politics, right? Well that’s what the past several classes of politicians we’ve selected to represent us want you to believe. However, if politicians are our representatives (and they are) why do we accept someone who represents us that bloviates mistruths or dodges the truth to either save their own skin, or to promote a twisted platform of policies. Maybe, we are all too busy to pay attention, or we don’t care, or, we are fed up with the conflict so much that we’ve tuned it out entirely. I would hope that these are the reasons and it is not that a great majority of us support and promote this type of behavior.

Take for example the DNC Chairman, Debbie Wasserman Schultz (D-FL). She is famous for making statements with little to no basis in fact, usually in a flood of talking points. In the end she only incites the same uncivil discourse she purports to oppose. Here is just one recent example of the two-sided comments she can launch onto the discourse of American politics with little or no facts to back it up. This week at an event she responded to a question about the civility of the discourse in Washington.  In the process of answering, she confesses her desire for more civility while blaming the Tea Party movement, and their lack of civility, for the shooting of Representative Gabby Gifford last year. This claim, while initially made by a variety of politicians, has been totally discredited. “I agree with you that we need to tone things down, particularly in light of the Tucson tragedy from a year ago where my good friend Gabby Gifford, who is doing really well by the way, I know everyone is glad to hear that. But, the discourse in America, and the discourse in Congress in particular to answer your question very specifically has really changed, and I’ll tell you, I, I, hesitate to place blame, but I have noticed it take a very precipitous turn towards edginess and a lack of civility, with the growth of the Tea Party movement.”

In our last article we covered Rick Perry and Newt Gingrich who have totally gone off the truth and honesty ranch in their attempt to pander to the lowest common denominator of our selfishness. In their attempt to save their own political futures, which they’ve done plenty of damage to on their own, both have taken to lies and misdirection and a pandering to jealousy in order to smear Mitt Romney’s reputation concerning his career in private equity investments into financially troubled companies.

All of this bad behavior should be called out and dealt with as if you personally were responsible for their statements. After all, they are your representatives. I guess this would mean that those offending the truth would apologize, shut-up and go home quietly, never to return to the stage again. Regardless of whether you are a Democrat, Republican, Independent, or any other Party affiliation, those from all sides of the aisle that make these statements should be held to task. If they are not, then we will likely get more of the same. And, if this is the case, maybe we get the representatives, and the discourse in our politics, we deserve.

In yesterday’s New Hampshire Primary we gained a closer understanding of where the voters are in terms of the political spectrum and who they are connecting with. The second test of Republican candidates in this election cycle left Romney on top with 39 percent, Paul second with 23 percent, and Huntsman in third with 17 percent of the vote.

First, it is worth noting that almost half of those voting in the New Hampshire Primary were not registered Republicans. This could indicate a movement to impact the Republican field by those in other Parties, or, the shift of the highly desired Independents into the Republican camp for this election cycle. With 47 percent of those at the polls yesterday describing themselves as Independents, we believe the latter may be true. Of those Independents who voted they split their vote between Romney with 32 percent, Paul with 30 percent and Huntsman with 23 percent according to Politico.

Romney demonstrated strength across the political spectrum in Tuesday’s vote potentially indicating an ability to reach conservatives as well as moderates and even some liberal voters. According to several reports from exit polling, Romney edged out Santorum 30 percent to 29 percent with voters who described themselves as “very conservative”.  Voters who were “somewhat conservative” went for Romney 45 percent of the time. And, he took the lead with 35 percent of voters describing themselves as “moderate” or liberals”.

Paul’s second place finish in New Hampshire was fueled by youth vote (18-29) which when for him with 49 percent of their vote. Romney finished a distant second with only 21 percent of the vote.

Huntsman’s third place finish would seem to indicate that there remains a group of Independent voters who have not fallen for Romney yet and are still in search of someone else to place their support in. According to exit polls, 32 percent of those voting said they would like to see another candidate in the race.

According to AP there were 237,656 voters in the Republican Primary. We could not find reliable figures for the turn out in the Democratic Primary but it was reported to be significantly less than the Republican. In 2008, there were a total of 529,711 votes cast in the New Hampshire Primary, 288,672 of those were in the Democratic Primary, and 241,039 were in the Republican.

Unfortunately, there appeared to be no knock-out punches in the results from New Hampshire. Despite the poor showing of Gingrich and Santorum there remains enough spark in their efforts to continue to bang away at Romney until the next contest, which will occur on January 21^st in South Carolina.

Based on these results, we continue to see support for our Moderate Candidate Theory. However, if the Republican field remains a 4 to 5 person race it will be difficult for the front-runners to align themselves to garner the support of those who are looking for a more sane future in Washington.

BTW - President Obama won the Democratic Primary in New Hampshire fending off a field of 13 others contending for the Democratic nomination.

More evidence of the possible emergence of the moderate Republican voter is the pecking order from the latest polls. With Romney leading, Ron Paul coming in second with 17%, Huntsman and Santorum with 11% and Gingrich with 8 % one could say that hard core far right conservatives may not be standing on guard as much as one might believe if you listen to the nightly news, or read in the popular press. 

Of the top five contenders for the nomination in the current polls, Santorum is the only candidate who has explicitly carved out the far right conservative position for himself. Romney has been working hard during the early running to convince primary and caucus voters that he is “the conservative” while his record would pull him more to the middle. Ron Paul is the schizophrenic politician who can make you say “yes, I believe” one second and then “what the hell did he just say”, the next.  Huntsman appears to be a very nice guy, but I am not sure what he stands for, and I am sure we won’t put him in the White House . I bet someone in his family is thinking, “…can you deduct the cost of a presidential campaign on your taxes?” Finally Newt, the tarnished conservative star that at first failed in the contest, only to rise from the ashes, only to crash again as his head, his ego, or his seven figure Tiffany’s credit line got the better of him.

Yes, there is huge opportunity for the party on either side of the aisle to take the prize offered in the middle ground this election cycle. With the President’s “firing” on Monday of his business friendly Chief of Staff Daley, a clear signal was transmitted from the Democrats that they are likely to hold fast to their hard left position and solidify the base that put them in the White House. What might spring forward after four years of ideological politics is an electorate ready for a Party that embraces a common sense approach to governing – and the first candidate to realize that may just win the multi-billion dollar prize offered in this contest (I use the term prize loosely). A polite, center –right (or left) candidate may have the advantage all seek.

What would a Moderate candidate look like? For, starters they wouldn’t trample on the rights of one group for the benefit of another solely based on religion or political ideology. They would embrace an approach to our common major issues with honesty and clarity, not fear mongering and finger pointing. They would not attempt to divide the country for the purposes of political gain. And, they would portray a positive vision for the future of our country which would transcend the current divisions erected in our society.

So, what do you think? Is this Moderate Theory a bunch of bull?  Let us know by posting anonymous comments to this article. In doing so, we’ll put to the test the Moderate Theory in our own unscientific poll. Pop quiz: When was the last time “Triangulated Ideology” (very similar to our Moderate Theory) was used successfully in a presidential campaign? 

The Republican candidates for President squared off one last time before the New Hampshire Primary this Tuesday.  With Romney‘s polling holding a 15 point lead, all of his opponents piled on one attack after another in an attempt to differentiate themselves and tarnish his reputation. Despite their best efforts Romney appeared to avoid a knockout punch from any of his rivals.

While Romney may have survived the attacks they will only add to the war chest of his ultimate opponent should he become the nominee.  And, the contest between the Republican candidates to become the most conservative “conservative” has the real potential to turn off Independents and “everyday” Republicans.  Now, we understand Primary and Caucus season where the candidates have to play to the extremes of their party in order to survive, since most moderates in either party don’t participate in large numbers.  That brings us to a key point: They don’t participate in large enough numbers to have an influence.

We have all heard too much and experienced about all we can take of the polarization of American Politics. We have dedicated several articles to the antics of both Democratic and Republican lawmakers in Congress of late. In fact, Congress’s approval rating is now hovering around 12%. The ironic part about that approval rating is that those same members of Congress are our representatives. Put another way, the make-up of Congress – represents us. Or, it at least represents those of us who participate in the election process.

A review of voter participation in presidential election years  indicates that roughly 50 – 60% of Americans of voting age participate in the final selection of a candidate for the highest office. When we examine the most recent 4 presidential election cycles we find a range of voter participation from a low of 49.00% in 1996 to a high of 57.37% in 2008. However, when we examine voter turnout in primary elections the participation rate drops off significantly. In the 2008 primary elections voter participation averaged 27.23% of the estimated voting-eligible population. Less than 1/3 of those eligible to vote in the last presidential primary elections selected the candidates that roughly 50-60% of the voting age population had to select from for the highest office in the land. What we are suggesting is that our lack of engagement as voters may have created the very problem we are complaining about.  You can track voter turnout for the 2012 presidential runoff elections at this site. So far, you will note that Iowa had a 6.5% turnout, although lower participation is expected in caucus states. However, if this single state is an indicator, the trend is down. In the 2008 Iowa Caucus voter participation was at 16.1%.

So, if you believe the politics are extreme on either side of the aisle, and you don’t see a candidate who represents a more moderate view of the world, which you share, then action is required. Candidates will gravitate to where they will get votes, it is how they survive. Based on the approval ratings of Congress, we have to imagine there are plenty of voters out there who would like to see a more common sense approach and a less polarizing environment in Washington. As our nation selects the two people who will ask for our vote in November, now is the time to help shape that decision.  Follow this link to find the date of the 2012 primary election or caucus in your state, and consider putting a note on your calendar to take action on that day. Regardless of your political affiliation, if we all participate, we all end up with a more representative government, and hopefully one which functions better than what we have today.

Article 2, Section 2 of the U.S. Constitution provides the President the power to make treaties, grant pardons and make nominations and appointments.  For the most part this section of our Constitution allows the President to take these actions with the advice and consent (confirmation) of the Senate – maintaining the ‘balance of power’ between the executive and legislative branches. This section also provides for an exception to Senate confirmation of appointments during periods when the Senate is in recess. Specifically, the Constitution reads; “The President shall have the power to fill up all vacancies that may happen during the recess of the Senate, by granting commissions, which shall expire at the end of their next session.”

In the early days of our country congressional recesses lasted 6 to 9 months at a time, creating the necessity for providing a means for the President to fill vacancies. In recent times, congressional recesses are much shorter in length almost eliminating the necessity of the President to bypass confirmation by the Senate. However, recent Presidents’ have made appointments to controversial nominees during congressional recesses in the hopes that the nominee would prove themselves – or to advance a political agenda that would not otherwise see the light of day if Senate approval was required.

George Washington used a recess appointment for South Carolina judge, John Rutledge as Chief Justice of the United States in 1795. Rutledge’s political views, and what has been called “occasional” mental illness, prevented his confirmation in the Senate. The Senate later rejected the nomination, Rutledge attempted suicide and then resigned. Some might call the Senate’s refusal to take up Rutledge’s nomination a good example of the Constitution in action. More recently, the Congressional Research Service (CRS) reported that President Clinton made 139, President George W. Bush made 171, and to date President Obama has made 32 recess appointments. The last four appointments occurred this week with 3 appointments to the National Labor Relations Board (NLRB), and Richard Cordray’s appointment as Director of the Consumer Financial Protection Bureau (CFPB).

A congressional recess is defined in the Senate Reference Glossary as; “A temporary interruption of the Senate's proceedings, sometimes within the same day. The Senate may also recess overnight rather than adjourn at the end of the day.  Recess also refers to longer breaks, such as the breaks taken during holiday periods.”  Clear as mud, right?

To avoid the President from making recess appointments Congress has typically gone into “pro-forma” sessions where one or a few Senators remains in DC to gavel -in and then shortly thereafter, 30 seconds or so, gavel the current session to a close. This technically keeps the Senate in session and not in recess – therefore avoiding the “recess appointment”.

Such was the political theater this week when the President made a “recess appointment” of three NLRB board members and the appointment of Richard Cordray as the Director of the CFPB. These appointments have raised the eyebrow of many conservatives, including the Republican Presidential candidates, the Senate Minority Leader and others. Even CBS News, in an unusual article, called out the President’s appointments questioning whether the appointments were legal.

We have spent plenty of time in this column writing about the CFPB and the flaws in its structure which have given rise to the current controversy over the Director appointment, so we will leave it to the Reader to review those points in prior articles. However, in the near term, the President spun his move as a bold executive action to thwart a do-nothing Congress – and Republican’s and others have called this a bold power grab by the executive branch. Welcome to the New Year – it appears that nothing much has changed over the holidays!

The history of Santa Claus as we know him today traces its roots back to a monk named St. Nicholas. Nicholas is believed to have been born sometime around 280 A.D. in Patara, near Myra in modern-day Turkey. St. Nicholas is best known during this time for giving away all of his inherited wealth and traveling the countryside helping the poor and the sick. Nicholas’s popularity spread over time and he became known as the protector of children and sailors. His feast is celebrated on the anniversary of his death, December 6^th. 

The popularity of St. Nicholas spread to German and Celtic Pagans who intertwined St. Nicholas with Woden, their chief god and the father of Thor, Balder and Tiw. Woden had a long beard and rode a horse through the heavens once a year in the autumn. In an effort to attract the Pagans, the Catholic Church adopted St. Nicholas and began to teach that he delivered gifts on December 25^th, as opposed to December 6^th. By the time of the Renaissance (1400 – 1600) St. Nicholas was the most popular Saints in Europe. So popular that he survived the Protestant Reformation which discouraged the veneration of saints.

St. Nicholas’s entre into America occurred in December 1773 when a New York newspaper reported that groups of Dutch families had gathered to honor the anniversary of the death of Sinter Klaas, a shorten form of Sint Nikolaas (Dutch for Saint Nicholas).  In 1809 Washington Irving popularized St. Nicholas by referring him to him as the patron saint of New York. Stores began to advertise Christmas shopping in 1820. By the 1840s Christmas shopping was in full swing. In 1822 Clement Clarke Moore, an Episcopal minister, wrote a long Christmas poem entitled, “An Account of a Visit from St. Nicholas” for his three daughters. Moore’s poem established many of the modern day images of Santa Claus we have all come to know. Moore portrayed Santa as a “right jolly old elf”, a portly figure with the ability to ascend a chimney with the nod of his head. He also popularized Santa Claus flying from house to house on Christmas Eve in a “miniature sleigh” led by eight flying reindeer and leaving presents for good children.

In 1881 Harper’s Weekly political cartoonist Thomas Nast completed Santa’s imagery by creating the first likeness of our modern image of Santa Claus as a rotund, cheerful man with a full, white beard, holding a sack of toys. Nast also rounded out the image with a bright red suit trimmed with white fur, North Pole workshop, elves, and Mrs. Claus.  In 1931 the Coca Cola Corporation hired a Swedish artist to create the image most of us remember today. The movie ‘Santa Clause’ staring Tim Allen based their image of Santa on the Coca Cola Santa.

When you summarize the history of Santa Claus into  roughly 500 words you can easily see how over time we’ve allowed the best in the human condition to rise and shine through. From the monk who gave away everything to help the poor and then became a Saint, to a jolly old elf who brings magic and a sense of endless possibility to kids everywhere, the spirit that embodies Santa Claus provides something for everyone to believe in. Merry Christmas – Happy Hanukkah! and- Happy New Year!  

Just in case you thought the Patriot Act was the first incident of the modern era having anything to do with domestic eves dropping, I am here to inform you that the precursor to all that ‘listening in’ had its roots deep in the Party Line – especially in the Upper Peninsula of Michigan.

In order to appreciate any of this we have to start from the beginning—before you had a phone attached to your house. It may be hard to believe there was a time when phones were not in houses (conversely it might be hard to believe you would want a phone in your house if you’re under 20), but there was a day, for some of us, when a home phone was something you didn’t take for granted. So, when the official “Bell Telephone” vans arrived and began burying the phone line all the way to my house – it was like our family had just blasted into the future.

After the installation was done and the official Bell Telephone vans left – there it was, a beautiful deep goldenrod colored rotary phone with the optional extra-long cord. We were now connected to the world, and could call anywhere and talk to anyone.

Unlike today, where “private” lines are the norm, we shared our “phone line” with a group of people on something called a ‘Party Line’. Now, this had nothing to do with a “party”, drinking, or in general having fun. However, it had everything to do with espionage at the familial level.

Our Party Line was made up of all relatives. Despite the fact our closest relative, and neighbor, was 2 miles away we were interconnected into what could be considered the largest home intercom between busy-body relatives that ever existed. So, when the phone rang two times in quick succession, that was a call for us. When the phone rang once, that was a call for Aunt Margaret, and three rings, it was for the Aunties. And, everyone on the Party Line heard the rings – regardless if they were meant for you or not. But of course, they were always meant for “you”.

So, therein lay the espionage. Better than pay-per-view, home videos, or any other form of voyeurism you could imagine – the Party Line became the best way for ‘concerned’ relatives to keep up on the “happenings” outside of their immediate lives. If you heard heavy breathing in the background during your call you knew who it was. Or, if you wanted to play Party Line roulette you simply let go a salacious comment or two just to spice up the next family get together. If Bell Telephone could have legally sold this type of access – ‘get access to one neighbor’s calls $5.00’, or, ‘up to 5 neighbors for only $9.99 a month’, their monopoly may have lasted well into this century.

So, as the “parties” became aware, a code emerged in discussions. And, a keen sense of the “click” was honed to determine if anyone was listening in. While the phone brought us access to the outside world, it also brought us much closer together as a family than any one “party” might have wished. 

Growing up in the Upper Peninsula of Michigan is a blessing in disguise. While some may look upon the U.P. as a barren last stop before the wilderness in Canada, those who know it see it different. You are surrounded by the most beautiful geography, not to mention the people, who by all accounts are of the best demeanor, with a mix of the untamed Midwest temperament, good humor and an endless amount of caring, from Ironwood, to Rockland, to Houghton, to Greenwood, to Marquette, to Newberry, and St. Ignace.

As we continue our holiday U.P. journey I remember two ladies who served as a lighthouse and guard rails in my journey through life. “The Aunties” were named Helen and Rose, the daughters of George who settled the family farm, “The Farm” we spoke of in the last article. Euphemistically called the “Virgin Aunties” (no one who used the phrase had proof either way that they were or were not) it was always fun to say it anyway. Despite our understanding or misunderstanding of their sexual exploits (which both are now twirling in their grave like a top) they were the “reverent” in our family of reverent and irreverent characters. I learned early on that the pathway to Aunt Rose’s date bars was through the Rosary. And, the same was true to be invited into the magical flower garden of Aunt Helen.

Unlike Uncle Topsy, the Aunties were really my biological “Aunts”, although they were truly my great aunts. None-the-less they took their role seriously and from a young age saw to it that I tended to a wholesome and proper direction in my life. I am hard pressed to recall the earliest memories of The Aunties since I believe they have been part of my life before I was aware that I existed. Their presence in my journey has always been welcomed and in the appropriate measure – even though at times it may have seemed one or two steps beyond.

I guess they can be most credited for showing me the power of believing in God. Their never-ceasing belief both demonstrated in action and in word, provided me with a beacon that, once established, has never gone away. I spent countless nights at “The Farm”, which was their childhood and adult home. The center of life at The Farm was a whitewashed log cabin with a root cellar, a huge kitchen wood stove, several small rooms and a loft with three beds, where the Whip-poor-will sung me to sleep each night I was lucky enough to stay there. My cousins, brother and I swung on the ropes in the barn and dropped what seemed like two stories into the hay below. And, all of us remember the fires on the hill with marshmallows, great stories, and the next morning 2 mile trek to the “falls” to catch the biggest brook trout I have ever seen in my life.

The Aunties managed to build a place in everyone’s existence that they touched. For me it was a quiet, gentle hand that guided me without coercion to the right path in my early years and into adolescents. And, as I emerged into my young adult years they still remained vibrant and vital in my path through life.

After I met the woman that I would spend my life with, and married her, the Aunties’ health failed. And sadly, I observed the passing of each in close succession. However, true to their mission in our lives, they stayed on task until the end. As my Aunt Rose lie in her hospital bed, and I was called to say my last good-bye, I held her hand in silence recalling all that this frail and beautiful woman had done for me. Expecting a silent good-bye I quietly prayed and thanked her for all that she had done. And, in an instant she shot up, sat straight up, eyes as wide as the day she was born, and said, “Never! Cheat on Mary!”, and just as quickly she laid back, closed her eyes and slipped off into the slumber that would be her last on earth. From that day, I never have to look too far back to know that I have at least two angels watching over me.

Growing up in the Upper Peninsula of Michigan is a blessing in disguise. While some may look upon the U.P. as a barren last stop before the wilderness in Canada, those who know it see it different. You are surrounded by the most beautiful geography, not to mention the people, who by all accounts are of the best demeanor, with a mix of the untamed Midwest temperament, good humor and an endless amount of caring, from Ironwood, to Rockland, to Houghton, to Greenwood, to Marquette, to Newberry, and to St. Ignace.

I will always look upon my “U.P. blessing” as extra special. I experienced the past, the present and the future all at the same instant for most of my childhood. This transcendental existence was made possible by those who surrounded me, and what surrounded me. First, I grew up with my brother, sisters, Mother and Father, and with my Grandfather, whom I introduced a few articles ago. When I was 4 ½ years old we moved from the “suburbs” of the “city” of Ishpeming to 80 acres adjacent to the “family farm”, which was settled in the late 1800’s. As with the U.P., this new home was a blessing in deep disguise. While there were endless hills, mountains of rocks, hazel nuts, Chokecherries, sugar plums, and abundant wild life, there was also nothing else. No best friends, girls, pick-up basketball games, or someone to get in trouble with.  It was usually me and my brother and the universe of possibilities that existed in the woods.

I grew up in an extended family which was a jumble of the most reverent and irreverent characters you’ll ever have the pleasure to know. This group of “uncles” and “aunts” ushered many of us along the path to adulthood, and in the process provided one adventure after another. Take for example my Uncle Topsy, who is neither my blood “uncle”, or, in fact, not really named “Topsy” (his given name is Robert). However, I swear today, if I saw him in the afterlife, I would only call him ‘Uncle Topsy’.  He always had a great big smile and never once failed to welcome me into the warmth of the cab of his four-wheel drive truck like I was “one of the boys”, to plow snow that fell at a depth twice my height. Despite the fact that there others present many times my senior, he always engaged me in conversation, while teaching me life lessons that I would put to use many times over in a variety of ways. Uncle Topsy was never a big church goer. However, he did make his mark on our church. On one occasion, as the story goes, he reluctantly went to Confession. That’s the encounter we call “penance”, which really means we go tell the Priest, who we see every Sunday, how awful we’ve really been. Well, Uncle Topsy had an angle which worked just fine by me. When asked the question what he wanted to confess, he simply responded, “Father, you name it, and I’ll Confess to it.” Something tells me our poor Priest had to ad-lib his response to that confession.

My Uncle Topsy met an early end while working on some heavy equipment, which for our family and the rest of the world, was a great loss. However, in the time he graced the surface of the earth and in more particular the Upper Peninsula of Michigan, he enriched the lives of everyone he touched with charity, humility, and most importantly his love of life and humor, which still shines in all whoever spent more than a moment in his presence.

As this holiday week starts, we look forward to highlighting the season and downplaying the negative politics we have all been living in. So, as we perused the “happenings”, which are few and far between on Capitol Hill to Pennsylvania Avenue, we hit a speed bump which made us say “...huh?"

Most may have heard of “Franking” as it pertains to Congress. It is the payment of the postage, with tax dollars, for mail sent out by members of Congress. And, like most good government programs lo and behold there is a “Franking Commission” who oversees what is “franked” and what is not.

Now, most reading this piece this morning will welcome the comment that we are utterly tired of the attempt to abolish “Merry Christmas” from the American lexicon. Those who advance such foolishness do so as some means of elevating us to a higher plane of sensibility, and should we say sensitivity. Most realize that this sensitivity is nothing more than a subtle form of censorship. So, a vast majority of us have rallied to protect such sensible forms of expression, like the simple act of wishing someone “Merry Christmas”.

Well, while we slept (I use the expression euphemistically) those who wish to make Christmas something less than its original meaning have been busy at work within Congress. I know this is shocking. And, while you might be pre-disposed to believe this is nothing more than conservative rant on Christmas, I will simply remind you that pea soup has “peas” in it, and ham and scalloped potatoes contain “ham” and “potatoes”. Just like Christmas is the celebration of the birth of “Christ” or Jesus, Son of God, Holy Child, the Anointed, or any one of the 208 other names some may prefer to call him. Despite this reality, some will think it wrong to recognize the holiday in this manner. It’s not surprising, since there is a concerted effort to make you believe that recognizing the season for its origins is somehow wrong.

Well, back to our story. It would seem that the Franking Commission in their infinite wisdom decided that members of Congress (specifically the House of Representatives) cannot send out any “franked” mailing which contain the phrase “Merry Christmas” in it. They also cannot mail out communications that contain the phrase “Happy New Year” either. Although, they can say, ‘have a happy new year’ – referencing the period of time and not the “holiday”.

So, for those on both sides of the aisle who want to know why nothing ever gets done in Washington, we believe we’ve found your culprit - total and absolute Political Correctness. I mean over the top PC, so much so that we cannot actually wish each other the holiday greetings once deemed polite and courteous at this time of year. And, more importantly we cannot call something what it is for fear that someone else who does not believe might take offense. So, for those who are offended by peas, ham or potatoes, we offer the following, and suggest the “Franking Commission” take these under advisement; green potage and pink meat with sliced spuds.  Although we are certain it won’t be long before someone finds offense with green, potage, pink, meat or spuds. At least this will keep someone employed changing the “Franking Commissions” rules and regulations. Just in case you would like to email the Franking Commission and wish them ' Merry Christmas and Happy New Year’ (as we did), please click on the link and spread the cheer.

Just when we reported on Wednesday that things are going to get boring in Washington through the end of the year, Representatives Paul Ryan (R-WI) and Ron Wyden (D-OR) dropped what was considered a bombshell on the Medicare debate.

To date, the lines have been clearly drawn between Democrats and Republicans on the issue of Medicare reform. Despite the fact that the program is in desperate need of an overhaul in order to survive, our politicians have proven that if they can find political benefit in exploiting the concerns of the important voting block containing 48 million Americans they will do so, despite the long-term consequences.  Well Ryan and Wyden may have just broken the stalemate on this issue and in the process saved us from ads where we see grandma being pushed off the cliff in her wheelchair, or, another variation of political theater.

You can read the entire proposal on the House of Representatives’ web site at this link. We summarize the major points here for you.

Program Start Date: The plan to overhaul Medicare starts in 2022. This protects all Americans who are 55 years old and older, including those currently on Medicare. No changes.

Choice: The plan leaves the current Medicare program in place, as is, and allows seniors to choose that plan. It also offers a choice of private plans, which can only be offered by insurance providers who must at least meet the benefits contained in the Medicare plan.

Affordability: The plan provides new “premium support” to seniors to purchase private plan coverage should they choose to not select Medicare. Since the number of seniors qualifying for Medicare will grow from the 48 million of today to approximately 70 million by 2022, the logic is that private plans will have an incentive to compete for this business, aiding in the cost containment effort. Premium support will be based upon the second-lowest-cost plan in a senior’s area.

Protection of the Guarantee: Beginning in 2023 there will be a cap on cost in the plan of 1% over GDP plus inflation. Any increases over the cap will be passed on in the form of reduced support for the area responsible for the growth including providers, drug companies, and means-tested programs.

Senior Protection: Realizing that opening seniors to private plans may bring out the worst in some plans, all private health plans offered must be reviewed and approved by the Centers for Medicare and Medicaid Services (CMS) including a review of pricing to weed out “junk plans and unqualified insurers”.

Protect the Safety Net:  There are currently 9 million seniors called “dual eligibles”, meaning they qualify for both Medicare and Medicaid based upon their income levels.  These seniors are forced into a fragmented system of care delivery. The plan will hold harmless dual eligibles from any premium increases, guarantees them the same options as any other Medicare beneficiary, adjust their premium-support payments to reflect their health needs, and provide for fully-funded accounts for out-of-pocket costs.

Now you are armed with the facts on this bipartisan plan to overhaul Medicare and protect our seniors.  Our hope is that even if we have to view a few ads with Grannies flying off cliffs, spreading this information will help thwart the efforts to obscure this plan and the necessity of finding a reasonable path forward. This might just be the one and only bipartisan thing that has happened in 2011 in Congress – embrace it.

It’s that time of year. Our experience in tracking financial, political and economic news tells us that December 15^th is the official start of “nothing happening for the rest of the year” season. Sure, we’ll have the latest drama from Capitol Hill until the end of the year. That is if Harry and John really want to work all the way through to December 31^st.  However, for the most part, despite our hopes – interesting news will be hard to come by.

But fear not, we have you! We want to stay true to our mission of providing interesting and informative articles each weekday on banking, the economy and politics (regardless of where they come from). So, we are reaching out to you to tell us what you want to hear about as 2011 comes to an end. We’ve received great feedback on the commentary, educational, and sometimes entertaining articles we offer up for your consumption. We’ve heard from readers from Romania, the United Kingdom, Russia, India, and dozens of locations in the United States. Most “like us”, some think we are a “little right”. Rest assured, we are always looking for the truth regardless of where if falls on the political spectrum. And, we are unafraid to publish our findings with no concern of who will like the findings or not.

So, take two or three seconds, or maybe as many minutes, and send us a message. Make it one word, or write a manifesto, but tells us what is important to you concerning the financial services industry, the economy, and politics from around the world. Be specific enough and give us a thread to work with. You have become the chief at the “assignments desk” at finews. Use your new-found article assignment power and let’s have some fun for the next several weeks. We’ll do our best to track down the stories you put us on to and provide something of interest with a little education and maybe a little fun.

If you obtain our articles through an internet blog source here’s your chance to subscribe to our daily e-newsletter for nothing. Don’t worry, we’ll ask you to put a price on our value in the future, ranging from nothing ($0) per month to something, anything.  For now, just sign up to receive our newsletter and experience it for yourself. If you read our articles through finews, LinkedIn (follow us), Facebook (like us), or Twitter (follow) check out this link and tell us what we are worth. Hey, we all have to make a living! Help us make this publication something that means something to you and you will help us reach our objective.

We look forward to hearing from all of you (literally)!

A Social Security Payroll tax cut to save families $1,000 per year – while hastening the time when the Social Security Trust Fund will run out of money; a bill to fix the flaw in the doctor reimbursements formula for Medicare, which would reduce payments by nearly 1/3, known as “doc fix”; a shovel-ready oil pipeline project which would lower our dependence on foreign oil and generate 20,000 jobs – but is opposed by environmentalists who feel it simply encourages us to use more oil; and a surtax on millionaires to pay for more government spending. These are the weighty issues occupying our Congress in their final attempt at governing in the 2011 calendar year. It almost all seems fitting.

Keeping this fair and balanced, let’s not forget an Executive Branch, who, as far as we can tell, is still trying to figure out how to insert their star player into the starting line-up for governing as they enter their fourth, and what appears to be final, season. Their latest attempts seem confused. He wanted the Congress to “pass this bill now” and reduce taxes on the middle class. He said over and over again that jobs were his #1 job, and he set the “haves” against the “have nots” in a misguided  re-election strategy. From our count his record is 1 of 3. He threatens to veto the very tax relief he proposed, and killed the pipeline project with inaction, removing any credibly to make the argument that jobs are his #1 job. Ironically, the one thing he has been good at – he has denied.

To all this we ask some simple questions – from the Citizens - who sit back and watch with little amusement at the idiocy and with amazement at the total lack of representation in our representative government.

If we gave every American family $1,000 and then depleted the Social Security Fund that much faster would it really do any good in the short run, let alone the long run?

“Doc fix” fixes a “flaw” in the Medicare reimbursement formula for doctors. Since June 2010 Congress has been struggling with a way to “fix” the automatic reimbursement cuts to doctors. These spending cuts were designed into the formula to keep the cost of Medicare in check. How can the American people be told they should be confident the government will be able to handle everyone’s (not just those over 65) health care in the near future?

Since the 70’s Oil Embargo the American Public has suffered under the threat of not being energy self-sufficient. We’ve fought wars, backed tyrants, and generally done things most aware American’s are not proud of in the pursuit of keeping unstable governments pumping and shipping oil to us. Why would we ever walk away from a project that guarantees to reduce our dependence on foreign oil?

Since when does anyone get to say repeatedly “Our #1 job is ‘jobs’”, and then gets a pass on killing a project that generates real “shovel-ready” jobs (20,000 of them)?

In the real word, the answers are; there is no good in the short or long run; because the government doesn't think most American’s have attention spans that long; you can’t live in the real world and make that decision; and, never.  

Recently released research and reports on the preference of young adults should give banks and credit unions some comfort, but only if they continue to innovate around how they connect and mine the potential within this market segment.

There are numerous sources which have demonstrated that bank and credit union customers prefer and trust their financial institution for a wide variety of financial services over non-financial service providers such as social networks, retailers, and technology companies. Most recently, Bank Technology News added to that long list of studies supporting this preference. The referenced article discusses research completed by Market Strategies International, suggesting young adults (18-34 years old) are more likely than any other group to trust banks more than alternative payment providers when it comes to emerging mobile-payment services. 

The results of this research echo what has been generally held for some time. Banks and credit unions continue to maintain the trust of customers, along with the preference of those customers to obtain financial products and services from their financial institution. The perennial fact that financial institutions maintain a position of preference with consumers for these services is matched with the age old issue of how those same institutions leverage that preference to their advantage. Leveraging this reality requires planning, innovation, and customer centric new product development to cash in on the potential that exists. If financial institutions fail to leverage this preference to their advantage, they risk giving up this business and the associated revenue to a provider who can communicate a value proposition.

And just in case financial institutions think that they can simply pump up the email marketing arm to communicate to their young adult customers, they should review this article in Business Insider on the recently released research, by Atos, on email usage. If you have young adults in your home you already know these results ring true. This research shows that internet email usage in the age group 12 – 17 has declined 31%, in the age group 18-24 the decline is 21%, and in the age group 25 – 34 email usage is down 1% year over year. Just as the young adult segment won’t answer a ringing phone, they are now not opening up email, preferring social networks that provide immediate interaction in real time – with real people they know.

Our unscientific survey of industry issues compiled from upcoming 2012 conferences' “calls for presentations”, indicates an industry in search of new fee income, new revenue streams, and a lot of questions about when is the right time to implement mobile. This would indicate to us that financial institutions would be wise to focus on new product and service innovations which address customer needs at each stage of their financial life cycle. If they fail to plan and adjust their offerings to meet the needs of these market segments, we are certain that social networks, cell-phone providers, and technology companies will.

We have a count-down snowman in the office. Each morning around 6am I reduce the current number of days before Christmas by one. Even though I know 24 hours separate the time it takes for me to reduce the number by one, the pace at which December is speeding by seems fast. Coming off a weekend of watching “It’s a Wonderful Life”, “Rudolph the Red Nose Reindeer”, “White Christmas”, and “Frosty the Snowman” I reflect back on the society that created these classics and I wonder how we’ve moved so far from the core which made those stories a mirror of us.

As I write this piece I am looking at a picture of my Grandfather. He was a great example of the type of American which mostly exist today in movies like “It’s a Wonderful Life”, and embodied the undefeatable spirit of Rudolph or Frosty. Before there was a middle class for politicians to pander to there were real, God-fearing people struggling to survive. While the struggle was always there they always lived life to its fullest. Now, I realize that I could romanticize a time that I only know through stories, pictures and memories. And, my memories capture each character as they entered their final act. However, sharing some of my memories during this season allows me to honor them and possibly stirs memories in you of other great people who rarely have the opportunity to garner the credit due for their life and sacrifices.

There are many directions to take this conversation regarding my Grandfather. From the time he chased a full size black bear from a 100 foot tree with only his voice and cane, causing it to fall 50 feet crashing branches and all to the ground, to how he taught me to skin and dress a partridge with only my bear hands (with little to no blood). However, I think the most appropriate place to introduce him is how he lived.

A World War I Veteran, an Explorer who made several treks to Alaska during the gold rush, to an Elderly pipe smoking man who read Zane Grey and stories about Huey, Dewy and Louie to my Brother and I. While he didn’t find his fortune in Alaska he did bide his time until the father of the girl he loved allowed them to get married (a multiple year process). He built his own home on a plot of land in Northern Michigan by hand over several years – a house which I grew up in and still stands today. At the age of 80+ he would pack a lunch and head off into the woods for hours at a time hunting birds – almost always coming back with a prize – despite the fact his hearing was less than stellar.

When politicians speak of “rugged individualism” I wonder if they really understand how rugged the individuals were that built this country. I know my Grandfather, and for that matter my entire extended family, understood what that phrase meant because they not only lived it, they placed their survival on the reliance of themselves and their extended family.  Capturing just a small portion of that spirit would do wonders. Having that spirit “occupy” our conscience would be magical.

We respect the Office of the President and the person who holds that office – regardless of Party. The holder of the Office is the leader of the free-world, and the leader of the greatest country on earth – that person represents all of us. Even as a youth, and then into my adulthood, I recall with clarity the times when I knew instinctively the Office was being tarnished.  Nixon’s pride, ego and the debacle of Watergate is an example of that abuse. Clinton’s recklessness and disregard for the honor and respect the Office is another.

Presidents have come and gone from both parties. And, while they all wore the cloak of their Party dogma during the election cycle, once they became the President of the American People, they avoided picking Party over the honor to represent all Americans. I think it’s called “being Presidential”.

I recall the feeling in January 2009. It was a feeling of great potential and healing for our nation. I truly believe most everyone was pulling for our Country, despite Party.  Flash forward to a few quotes from Our President’s speech this week in Kansas.

“Those at the very top grew wealthier from their incomes and their investments – wealthier than ever before.” “Huge bets – and huge bonuses – made with other people’s money on the line.” “It combined the breathtaking greed of a few with irresponsibility all across the system.”  “…they want to go back to the same policies that stacked the deck against middle-class Americans for way too many years.” “…the free market has never been a free license to take whatever you can from whomever you can.” “…mortgage lenders that tricked families into buying homes they can’t afford, a financial sector where irresponsibility and lack of basic oversight nearly destroyed our entire economy.” “In the last few decades, the average income of the top 1 percent has gone up by more than 250 percent to $1.2 million per year.” “And yet, over the last decade the incomes of most Americans have actually fallen by about 6 percent.”

These quotes cover the first 3 pages of 8 of the President’s speech.  On page 6 he made this statement, “This isn’t about class warfare.”

Now, we hold nothing against the political views of Democrats or Republicans. The divide between the two Parties is legend. And, this period will likely be marked in our history as one of the most divisive in our country’s existence.  However, our country affords the ability for each to believe what they may – and that’s a good thing. What does concern us is a President who runs on a platform of dividing the very People he is charged to represent into ‘haves’ and ‘have nots’, and then disrespects our intelligence by telling us to our face that is not what he is doing.  There must be a better way to bolster the growth of the middle-class, represent all Americans and maintain the dignity of the Office.

In hockey they call it the hat-trick, the scoring of 3 goals in one game by one player – a rare occurrence.  Bad luck is said to come in groups of 3s. There were 3 blind mice, 3 little pigs, and 3 wise men. And, we would be remiss not to mention the 3 Stooges. And, now Congress has added to the list of things that come in 3s. This is the 3^rd year Harry Reid has threatened to make Congress work through the Christmas Holiday to get their business done.

In 2009, it was the Health Care Bill that created the potential for lawmakers to work through Christmas. Congress passed health care reform on Christmas Eve. In 2010, in the Congressional lame-duck session Reid threatened again on December 14^th to bring back Congress after Christmas and work through the end of year to pass a number of bills, bans and a resolution to fund the government (since there was no budget).  On December 6^th, 2011 Politico reported that Reid once again made his threat during a news conference, “We are not going to leave Washington until we pass the extenders, pass the payroll tax cut…unemployment compensation, omnibus (to continue to fund the government), and I’m missing one thing. Anyway, there are five things we have to do.” Later Reid’s aides said the fifth item was the so-called “doc-fix” which pays for the reimbursement formula for Medicare providers.

And we wonder why the approval rating for Congress is 12.3%.

We could get into the fact that the major roadblock in the halls of Congress is the payroll tax cut which both parties agree should pass – it’s just that nasty "how do you pay for it" thing. However, we would rather focus on what’s really wrong with Congress. Let’s examine a few points to see if we can figure this out.

Could it be simply procrastination? Congress hasn’t passed a budget for our government since 2009.

Maybe it’s bi-polar disorder? In 2009 every Democrat talked constantly about health care reform. Today, you couldn’t get one to mumble the term in public. Recently, Republicans stood fast on not raising taxes and then turned around and offered “revenue increases”.

But, maybe there was another story of 3s that might help us figure this out. The Boy Who Cried Wolf falsely cried twice and the villagers came – and he laughed. The boy cried a third time – the villagers didn’t come and he lost his sheep to the wolves.  It’s our opinion that Harry’s third threat, and Congress in general, is wearing thin with the villagers.

Fed Attempts to Manage Public Opinion | Message

Federal Reserve Chairman Ben Bernanke penned a letter to Senate Banking Committee Chairman Tim Johnson (D- SD), and Ranking Member Richard Shelby (R-AL) on Tuesday. The letter refuted articles and other public commentary on the Fed’s emergency lending activities during the financial crisis. Bernanke pointed out that these articles and commentary contained “...a variety of egregious errors and mistakes.” The six page letter Bernanke takes on six points to set the record straight. You can read the entire letter by following this link.

The six points of contention Bernanke identifies are;

1.       The Fed conducted “Secret” lending not disclosed to the public or congress

2.       Fed lent or guaranteed $7.7 trillion, $16 trillion or even $24 trillion

3.       Lack of recognition that the assistance generated income for the American taxpayers

4.       Lack of recognition that loans helped much more than the largest banks in the country

5.       Perception that institutions receiving assistance were insolvent or in “deep trouble”

6.       Perception that financial institutions reaped $13 billion in profit on low cost loans from the Fed

In review, no one would argue all six issues have been popular talking points in both the press, Congress and the presidential campaign. In this new era of “transparency” at the Fed, it was good to see the Chairman address each. We will provide a brief summary of his response to each item.

In addressing the “secret” lending Bernanke said, “No lending program was ever kept secret from Congress or the public.” On the amount of lending made by the Fed, some reports at $24 trillion, Bernanke said, the liquidity “…programs was never more than about $1.5 trillion, that was the peak reached in December 2008.” Concerning the lack of recognition that lending provided profits for the Fed, Bernanke said, “…emergency lending programs have generated in estimated $20 billion in interest income for the Treasury.” “…in 2009 and 2010 the Federal Reserve returned to the taxpayer over $125 billion in excess earnings”. Dispelling the notion that only the largest institutions received benefit, the Chairman said, “TALF (Term Asset-Backed Securities Lending Facility), supported 3 million auto loans, more than 1 million student loans, nearly 900,000 loans to small businesses, 150,000 other business loans, and millions of credit card loans.” Concerning the perception that the Fed helped insolvent banks  the letter provided, “…all loans extended during the crisis were fully repaid with interest, indicating that with rare exception, recipients of these loans generally suffered from temporary liquidity problems rather than being fundamentally insolvent.” And, putting a fork in the often heard claim that banks made huge profits off of the cheap money provided by the Fed, “Most of the Federal Reserve’s lending facilities were priced at a penalty over normal market rates so that borrowers had economic incentives to exit the facilities as market conditions normalized…”

The letter was an unprecedented move by the Fed Chairman to attempt to regain the upper hand related to public opinion concerning the Fed’s intervention during the economic crisis. We wonder if Chairman Bernanke’s is working on a similar draft to explain the Fed’s role in the Euro-Zone bailout.

The news broke quietly on Monday on the overstatement in the number of new members credit unions acquired in the month that lead up to Bank Transfer Day (November 5^th). It was widely reported in nearly every news outlet and on the nightly news, several times, that credit unions had swelled their member ranks by 650,000 members between September 29^th, the day Bank of America announced their $5 a month debit card fee, and November 4^th, the day before Bank Transfer Day. Those estimates were based upon two CUNA (Credit Union National Association) surveys. The surveys were detailed in an article posted on November 21, 2011, titled “Bank Transfer Day” Evolves into “Bank Transfer Season”. Within this article you will find links to detailed reports by state on the estimated number of new members and new deposits.

On Monday, CUNA released a statement which reduced the number from 650,000 to 214,000 new members acquired through Bank Transfer Day activities during the month of October. According to the statement, the organization said the discrepancy is likely the result of ambiguous language in its previous survey, which many have caused respondents to confuse “new accounts” with being “new members”.

Despite our best efforts, we were unable to locate the actual statement issued by CUNA on their web site or any other source. Excerpts of the statement were released in news stories posted on the web by CNN, The Chicago Tribune, finance.yahoo.com, and a handful of other sources.  

With the restatement by CUNA the massive shift of customers from banks to credit unions once credited to the Bank Transfer Day movement fizzled to slightly better than 1/3 of the 650,000 originally reported. We are a little amused that the “news” that nearly everyone in the press was duped into reporting the 650,000 number, and therefore knowingly or unknowingly feeding into the false hype over Bank Transfer Day, has passed without even a proper “correction” statement.  BTW – please consider this article our “correction” statement.

Even though Bank Transfer Day failed to live up to its once believed heights of “transfer”, it did serve as a reminder of an important fact. While the press can sway the “reported” public opinion on a topic by the power of their reach and message, it is much more difficult to get the public to act on something they don’t believe in – like moving their money out of their bank. And, maybe that’s the silver lining in this story.

A year ago who would have thought we would be opining for the 'good ole days' when the Federal Reserve was only buying up toxic Mortgage Backed Securities (MBS), bailing out the largest Investment Banking Firms, and buying U.S. Treasury debt to the tune of trillions of dollars? Well, Wednesday many who railed against the aforementioned actions of the Fed were thinking just that.

The Fed, along with the Central Banks of Japan, Canada, Switzerland and England, all offered to swap Euros for their currency in an effort to infuse the Euro Zone with liquidity. The collection of "other" Central Banks was more for window dressing and to present a unified front to the world that these countries stand ready to assist in the Euro Zone debt crisis. The lead Central Bank with the pipeline wide open to Europe is the U.S. Federal Reserve, which cut its lending rate nearly in half, and is now swapping Euros for Dollars to fill up the vaults of the European Central Bank. This open-ended arrangement will continue through February of 2013, and could run into the trillions of dollars. Trillions of dollars the Fed will simply print out of thin air and swap for the now questionable Euro.

The premise behind this move is simple. Countries, like businesses, require access credit in order to pay their bills - it’s called liquidity.  When they can access credit all is well. However, in Europe, because of fears of a recession and the failure of governments to service their debit, sources of credit, for example from U.S. Banks, start to dry up due. As fears that Euro Zone governments cannot service their national debt increases the risk to borrow to them rises. At this point Euro Zone government bond yields are now around 7%. The high-priced bonds create even more stress since the debt burden even rises faster at higher interest rates. That's why Greece, Ireland and Portugal required bailouts when their government' bonds carried the dreaded 7% yields.  With the fears of recession and the huge government debt, Euro banks get concerned and reduce or stop making loans to their customers - and the house of cards first grinds to a halt - and then collapses. By providing stability to the Euro and pumping in liquidity in the form of Dollars at low-interest rates the Fed is attempting to give the Euro Zone another chance at economic viability.

No one will argue that we are all interconnected in the world financial markets. And, if the Euro Zone goes under the loans made by U.S. banks into that economy would ripple into our country and create problems, possibly causing further large banks to fail and triggering a '2008 like' event. However, many argue that the Fed's experiment of printing money to absorb toxic Mortgage Backed Securities, and printing money to buy our own U.S. Treasury debt has the real potential to help short term - and then cause prices to skyrocket as inflation grips the country. The fact is we are in uncharted waters. It could be that by simply replacing "lost wealth" with printed money that inflation is not going to rear its ugly head - but no one knows.

What is clear is that the Fed has now made the U.S. the World's "lender of last resort". Up until 2008, the Fed's role of acting as the "lender of last resort" was limited to lending only to U.S. banks.  By expanding this role to the World we have become even more entangled in the fortunes of the Euro Zone and the Euro itself in this grand experiment.

Right In Front of Our Eyes

Change often happens right in front of us. A small move here, a follow up move there, and before you know it, what was a normal course of business - is no longer. Sometimes that change is for the better and sometimes not so much. And, sometimes the change rearranges the landscape in which business, and indeed society, operates within. But often the change happens slowly and not with a big bang that draws attention.

Such was the press release from the OCC yesterday announcing that they are now taking the next steps to complete the actions necessary to enact Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In the OCC release announcing the new proposed rule, Section 939A "...requires each Federal agency, within one year of enactment (of Dodd-Frank), to review: 1) any regulation that requires the use of an assessment of the creditworthiness of a security or money instrument, and 2) any reference to or requirements in those regulations regarding credit ratings. Section 939A then requires the Federal agencies to modify the regulations identified during the review to substitute any reference to or requirements of reliance on credit ratings (emphasis added) with such standards of creditworthiness that each agency determines to be appropriate." 

So, essentially the government, which used to require national banks to invest in only the highest grade investments - deemed to be U.S. Treasuries - is now stripping away that highest grade investment rating requirement and substituting it with "...such standards of creditworthiness that each agency determines to be appropriate".  When Dodd-Frank was enacted the U.S. still had its pristine credit rating and many thought that the move in the Act was meant to take a slap at Rating Agencies (Moody's, Fitch, Standard & Poors) who continued to rate mortgage backed securities as good as gold until they became something akin to as good as nickel, tin, or worse in some cases. Flash forward to the present and the U.S. has experienced the first downgrade of its debt in history, the Super Committee failed to find a token amount of spending cuts, and we now have further threats by rating agencies to downgrade the debt of the U.S. All of this has brought us to the reality that the good ole days of filling up a bank's investment portfolio with the safest security on Earth - U.S. Treasuries - may be coming to an end since Treasuries may not be "the safest" anymore - well they might be the safest - just not as highly rated as they use to be.

It will be up for debate whether or not it was a good idea to remove the use of Credit Rating Agencies from the determination of what investments are suitable for banks in order to maintain "safe and sound" investment practices. However, it would appear "convenient" now that Treasuries have been downgraded once and likely to be again in the future - that the government has changed the rules and now the definition of what the term "investment grade" means. We wonder in the long run whether everyone will look back and make the determination that Dodd-Frank made it more or less likely that we would have another economic crisis like the one it said it would help us avoid. One thing is clear, this change happened right in front of our eyes. We wonder how many actually saw it happen.

The U.S. Chamber of Commerce released a survey in the past week which provides an interesting insight into what the public will do when provided the facts on issues such as regulation, government expansion, and spending. The survey, conducted over November 9 – 13 of 1,005 Americans, found that a majority oppose the creation of the Consumer Financial Protection Bureau (CFPB) after they are given information on how the new agency is structured and how it operates. As we have discussed many times over the past year, the CFPB is a signature part of the Dodd-Frank Financial Regulatory Reform Act. The new agency has a $500 million a year operating budget, which is provided directly to the agency from the Federal Reserve, with no oversight of Congress. And, the yet-to-be approved director of the agency serves a 5 year term and can only be removed from office by the President under extreme circumstances.

Over two-thirds (68%) of adults have not heard very much or nothing at all about the CFPB, while one-third (37%) say they support the CFPB based on what they know.  Upon hearing about the single, 5 year term director and the difficulty in removing the director from their position, 64% say they are much less or somewhat less likely to support the CFPB. When asked if the CFPB should have access to more than a half a billion dollars a year in government funding outside of Congressional approval, 68% say they are much less or somewhat less likely to support the CFPB. And, when they are told that there are already seven other federal agencies in charge of consumer protection and the CFPB is adding another layer of federal oversight, 65% were much less or somewhat less likely to support the CFPB.

For those who have watched this issue unfold over the past year and a half the issues related to the unprecedented power placed in the director of the CFPB, the $500 million budget outside of Congressional oversight, and the fact that the CFPB does not streamline consumer protection it simply adds to the complexity, is nothing new. What most people, who casually have seen or heard something about the CFPB, are likely to believe is that Republicans oppose the CFPB because of their backing of big business, and their lack of respect for consumer protection. While at the same time, believing Democrats have created the new agency to protect consumers from the corrupt financial services industry, who constantly schemes to find ways to rip them off.  In reality, there is a grain of truth in each of those arguments – just enough to obscure the issue and keep the majority of the public from a basic understanding of the issues.

However, to our thinking, the survey results highlight something important. The points of contention about the new agency (budget, director’s power, redundancy) are not difficult issues to convey to the public. And, when presented to the public without filters or bias – the public makes logical choices. Just imagine if we had an unbiased national press which could present not only the CFPB story, but the truth about our national deficit and debt, affordable housing, and our nearly 50 year war on poverty – how different would our reality be today?

The start of the Holiday Season gave us our first indication that consumers are ready, willing and able to support our climb out of our economic slump. Black Friday, Black Saturday, or now as it is more commonly called, Black Friday Weekend, provided the first glimpse into the consumer's appetite for spending this Holiday Season. The season's first official shopping weekend generated sales of $52 billion, up from $45 billion last year, according to National Retail Federation (NRF). A record 226 million shoppers visited stores and websites over Black Friday weekend, up from 212 million last year. And the average holiday shopper spent $400 over the weekend, compared to $365 last year.

Now with Cyber Monday upon us, we are about to get the second report card on how many will take advantage of online shopping , both at work and at home. According to NRF, over half of the U.S. adult population - roughly 123 million people - plan to shop from their office or home today. Last year Cyber Monday was the biggest online shopping day of the year, with sales of $1 billion.  The results of this year's Cyber Monday will provide the second data point on how much consumer spending will aid in the overall recovery, or not. The level of sustained sales activity over the next three weeks will tell the real story - and there is plenty to get in the way of keeping the Christmas spending at the levels seen over past several days.

While consumers have shown the first positive signs of holiday cheer, Congress and the Administration are waking up from the holiday with a real hangover that is likely to get worse as we edge toward the end of 2011. With the failure of the Super Committee to find $1.2 Trillion over ten years lawmakers are now forced to go back to the beginning to try and salvage a deficit reduction plan which will signal to the markets that we are serious about controlling the spending of our government. If they are successful, they will join the ranks of consumers and add another positive sign to the recovery. If they fail to reach a meaningful plan to reduce the government's spending, it will likely hurt the markets, and in turn reduce consumer optimism - which in the end will only prolong our economic woes.

The new beginning will likely come from one of three options that have been put on the table in the past. The first option is the $4 Trillion, 10-year plan offered by President Obama's National Commission on Fiscal Responsibility and Reform (aka Simpson-Bowles Committee). The Simpson-Bowles recommendations were offered in December 2010 and failed to get support from either the President or Congress. The second option is the $6 Trillion, 10-year plan proposed by Budget Committee Chairman Paul Ryan, which passed the House of Representatives in mid-April but was stopped cold in its tracks by Democrats in the Senate. Shortly after the Ryan plan failed to get Senate support, the third option, the "Gang of Six" senators proposed nearly $4 Trillion in deficit reductions over a 10-year period. The Gang of Six proposal fell apart in July after it received criticism for not doing enough to cut entitlement growth while proposing too much in tax hikes. And, while the aforementioned three options are the most developed, the Super Committee did leave some remnants of a deal to be considered. There is the Republican "Toomey Plan", which generated plenty of revenue without raising taxes, and the Democrat's plan, which exceeded the entitlement savings proposed by the President's Simpson-Bowles Committee while increasing taxes by $1 Trillion over 10 years.

So the table is set. Consumer optimism appears to be leaning positive, which, if sustained, could become one leg of the recovery stool. The second leg of the stool will be our government's ability to responsibly address the spending it has taken on with no corresponding means to pay for it. And, finally, the third leg of our recovery stool will be the restraint of special interests groups who have sold their members' votes for our unfunded spending. So, here's to hoping that out of those estimated 123 million people shopping today on Cyber Monday, all of the lobbyists in Washington are shopping from work - spending their own money - and not ours.

The real story of Thanksgiving in America is one often not told or taught anymore in our country. However, in the times we live in today, the real story of Thanksgiving might just have more meaning than at any other time in our history. While researching today’s article we were surprised to learn many things about Thanksgiving that have simply been forgotten, erased, or over commercialized. We hope you enjoy what we found—as much as we did.

Plymouth Plantation was founded in 1621 and for two years the Pilgrims lived under the direction of their Governor, William Bradford. Their settlement had been organized on a communal basis, which was a requirement of those who financed their travel to the New World. All worked for the common good, and all shared in the fruits of the labor from the community. There was no private property and no opportunity to build personal wealth—all were equal. Bradford documents in his diary during the period 1621—1622 the results of communal living where all lived under the precept of “from each according to his abilities, to each according to his needs”. 

“..that the taking away of property and bringing in community into a commonwealth would make them happy and flourishing; as if they were wiser than God. For this community (so far as it was) was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort. For the young men, that were most able and fit for labour and service, did repine that they should spend their time and strength to work for other men’s wives and children without any recompense. The strong, or man of parts, had no more in division of victuals and clothes than he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labours and victuals, clothes, etc., with the meaner and younger sort, thought it some indignity and disrespect unto them. And for men’s wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc., they deemed it a kind of slavery, neither could many husbands well brook it.” – excerpt from William Bradford Diary – Source: University of Chicago – Founders’ Constitution

The Pilgrims, living under their communal organization, failed to generate enough of nearly everything to support the colony. This resulted in what Bradford called a colony riddled with “corruption”; the supply of food became small because “much was stolen by night and day, before it became scarce edible.” The harvest feasts of 1621 and 1622 were characterized in some reports as the “last meal of condemned men.”

Bradford realized that something had to change, and in the spring of 1623 he disbanded the communal organization, assigned private plots of lands to the Pilgrims, and told them that they were on their own to provide for their families. If they succeeded and had more than they needed they could use the excess to trade and barter.  Bradford wrote about the results of this action in his diary—”This had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression.” – excerpt from William Bradford Diary – Source: University of Chicago

The first Thanksgiving was held on August 9, 1623 at Plymouth Plantation and it celebrated the profound power of individualism, private property, and free markets. In this season of Thanksgiving, let us all give thanks that our country’s origins and the lessons learned in forging this country still speak to us today. Let us hope that a majority is listening.

Many of our readers most likely thought they would find a story about the Super Committee failure to reach a deal to reduce government spending by $1.2 Trillion over-a–ten-year-period. Or, maybe we would comment on our President’s news conference, or, should we say political campaign speech, in which he placed blame for the failure on one side, and then pretended to be a ’budget hawk’.

However, we decided to take a step back and look at the facts underlying the disagreement. In doing so, just maybe we’ll see this “stalemate” as one of the biggest ruse ever perpetrated on the American Public – by either Party. Let’s start with our national debt of $15 Trillion plus (and ticking). That level of debt racks up $4 Billion a day in debt service. Meaning, if we don’t do anything – we don’t spend a red cent more – we would spend $4 Billion more each day just to pay for the debt we have already accumulated.

The Super Committee’s job was to cut $1.2 Trillion over-a-ten-year-period or, roughly $120 Billion per year for each of the next 10 years.

Now, let’s look at the $4 Billion a day to maintain our current national debt (without 1 cent more being spent) and multiply that by 30 days in a month, which equals, $120 Billion per month. Sound funny? Congress could not find its way clear to cut spending by more than what gets racked up in just 30 days from just maintaining the current debt we have.

With the Super Committee news, the stock market dropped down 249 points, due to the failure to find a way to cut spending by 30 days interest cost on the mess of debt already mounded up.

Now, for just a moment let’s forget about the current $15 Trillion in debt and look at the real problem - our government’s ability to make promises for services that they have not funded – for example – Medicare and Medicaid. According to Forbes, the unfunded liability (the money we would need to have on hand for these programs for benefits people are already expecting) would be more than three times our national debt (when it was $14.3 Trillion), meaning more than $43 Trillion. But let’s let the AARP commercial help us ignore that ugly reality.

However, in this season of Thanksgiving, we want to find a reason to be thankful. I am thinking the Super Committee may have just given us that reason – with their abuse of power, wrapped up in a ruse, who knows, it might just be enough to wake up people in this country to tell their Representatives to start making the tough decisions they were sent to Washington to accomplish.

Is a pledge to never raise taxes good for our country, or not? That has become a question which has been asked more frequently over the last several months. A question that most likely has been asked more frequently than at any point since the establishment of the Americans for Tax Reform (ATR) a non-profit organization headed by Grover Norquist. It would appear that most Republican members of Congress, and all but one Republican candidate for President, believe it is a good thing for the country. In fact, in the 112^th Congress, 238 Representatives and 41 Senators have signed the pledge – all Republicans with the exception of one Democratic Representative from New Jersey. And, all Republican candidates for President, with the exception of John Huntsman, have signed the pledge. One thing is for certain; the pledge does prevent politicians from simply saying they will never raise taxes during the election cycle, and, then reversing course and doing the opposite once they get elected. While ATR doesn’t prevent a member of Congress from voting for new taxes – it does use its significant resources to make sure the constituents of the member of Congress know that their representative has gone back on their word – and broke the pledge. And, ATR is very effective in their “awareness” campaign – creating an almost certain end to a politician’s career in the next election cycle.  Even so, on November 2^nd 40 Republicans (including 37 who signed “the pledge”) and 60 Democrats sent a letter to the Super Committee encouraging them to “put all options on the table”.

ATR has also been criticized of late as being a roadblock to true tax reform in our country, since many of the pledge takers don’t dare to address the tax issue for fear that they will be targeted by Norquist’s ATR awareness campaign during the next election cycle. Norquist rejects the notion that a pledge taker cannot participate in true tax reform, and in a Politico article, Norquist is quoted on the subject, “The pledge says no new net taxes, it is designed to block new taxes, not tax reform.”

On one hand most could agree that keeping a politician’s feet to the fire on a campaign promise is a good thing. And, on another, a pledge that does not allow our politicians to react to the “situation on the ground” when making decisions may not be the wisest course of action.

So, is ATR an effective means to enforce the voter’s desire? Or, is it an example of an unelected special interest group with too much influence over Congressional decisions?

As you read, this imagine you’ve just arrived at work and opened up your email to scan your inbox for important messages. Your inbox pops up and you scan down the “from” and “subject” columns and hit a message from; ‘A Joint Message from Your Five Audit Departments’, with a subject, ‘Clarification of Who Will Audit Your Department’.  You think to yourself, “Wow, we used to have four audit departments at our bank and I was confused, now with five doing nearly the same job, I am glad they decided to clarify who we need to pay attention to.” So, you click on the message and start to read. The message explains how the five audit departments in your bank have decided to divide up your bank’s departments and assign each to one of the five audit departments. The primary means of deciding which audit department will audit your department is based on your size, and more specifically, the number of FTE you have. You think to yourself, “…well that kind of makes sense, I guess the larger the department the more complex…”  You read on, it essentially says that the Board of Directors has decided that the number of FTE is the best way to allocate the oversight responsibilities of the five audit departments. You think to yourself, “….well if we had one audit department the Board wouldn’t have to worry about the metric to decide who oversees what…and if we had one audit department wouldn’t that save a lot of money? And, how about the five EVPs, who head each of those audit departments, that sit on the Executive Committee – seems like they have a lot of influence over what the Board sees and what they don’t – like; why do we need five audit departments?” But you then think, well, at least I know which of the five audit departments I need to pay attention to, and you move onto the next important email in your inbox. Pop back to reality and you are thinking,”… what the heck, no one has five audit departments. That’s crazy.” Furthermore, you think, “…why would any bank have five audit departments? That would be the most inefficient, and costly, thing to do.” Then you scan your RSS Feeds and see a joint news release from the newly formed Consumer Financial Protection Bureau (CFPB), the Federal Reserve, FDIC, NCUA, and the OCC. The release is titled, “Agencies Issue Statement to Clarify Supervisory and Enforcement Responsibilities For Federal Consumer Financial Laws”. After reading through the release, you can see the logic of why your five audit departments had to issue their clarification – maybe. And, then you read a news article on the Congressional Super Committee titled ‘Congress Struggling to Find $1.2 trillion Reduction in Government Spending Over Ten Years’. Read the actual press release issued on November 17, 2011 from the CFPB, the Fed, FDIC, NCUA, and the OCC and see if you can find a simpler solution to solve the Super Committee’s dilemma.

The news pipeline is full of stories concerning Freddie Mac and Fannie Mae's woes and the $170 billion in bailout 'we the taxpayers' have made to keep both government sponsored agencies afloat. However, we have heard little about "the other agency", the Federal Housing Administration (FHA), until it made its own news on Tuesday. The FHA does not originate mortgage loans but insures them with the full faith and credit of the United States (in other words $0.60 of our tax revenue and $0.40 borrowed from China). Bunched together with Freddie and Fannie the FHA has been part of the federal government's effort to promote Affordable Housing, with the mission to encourage every American to take a loan out and buy a house. Well, the FHA in its annual report to Congress announced yesterday that there is a 50 percent chance it too will need a bailout since its loss reserves have fallen below the mandated 2% level to .24% and have been there for several months. According to a CNBC article, the FHA has gone from less than 5 percent market share at the height of the housing boom to now more than 30 percent as private insurers have backed off, allowing the government to take on the risk others wanted to avoid. Representative Scott Garrrett (R-NJ) speaking on the latest shoe to drop in the government's attempt to encourage home ownership said, "Because the federal government has played an outsized role in our country's housing system, the American taxpayers are now at risk of another costly bailout that will put future generations even deeper into debt. Today's report shows that FHA is overleveraged at a shockingly high rate of 400 to 1, making Lehman Brothers and Bear Stearns, the poster children of the 2008 financial collapse, look like financially solvent institutions." Looking back on yet again another attempt by our government to "help" the American people we can only point to those who warned of the dangers of artificially stimulating markets through government meddling. Through a massive amount of government regulation, expense, and effort millions of Americans purchased homes they would not have been able to acquire if it were left to the private market to finance and ensure. And, once the housing market was over stimulated with all the purchasing power artificially injected through government intervention the bubble burst. This left millions who participated in the government's plan to ensure the widest distribution of homeownership (many politicians on both sides of the aisle called it "wealth building" ) upside down on that investment leaving them with only two choices; file for bankruptcy or walk away and default on the investment encouraged by their own government. But don't worry, the government still believes it can help. This week lawmakers vote on reinstating higher loan limits for "just" the FHA, and not for Freddie or Fannie - with the real potential of ensuring the FHA will need a bailout from the American taxpayer. Maybe we need our members of Congress to use that exemption from trading on insider information in their own portfolios - and use it on the bets they make for the American taxpayer. If they did, we believe there may be some more rationale "investments" made on our behalf. But don't worry, we are pretty sure they don't view "investments" of your money the same as they do their own.

Freedom Affirmed Or Lost?

On Monday the Supreme Court announced it would take up the Affordable Care Act (ACA) (aka Obamacare) in the spring. Most observers believe arguments will occur over an unprecedented 2 days in late March and consume over five and a half hours of the court's time. Typically cases only get one hour for arguments. This timing will place the decision from the court sometime in June, or, four months before the Elections. At the center of the arguments will be the 'individual mandate', which many say is the keystone to the whole Act. If the Supreme Court upholds the mandate as constitutional it will make Congress' power virtually unlimited when it comes to forcing Americans to buy privately-manufactured products - something which will have far-reaching implications. If the mandate is struck down by the high court, then many predict Obamacare will unravel at the seams. Besides the individual mandate question the court will also hear arguments concerning the mandate that states increase their Medicaid participants - which is part of how ACA moves towards universal coverage. Statements from opponents of ACA, as well as from the White House, were in favor of putting the signature achievement of the Obama Administration up for the final question right in the middle of the election cycle. Pam Bondi, Florida's Attorney General said yesterday, "We are hopeful by June 2012 we will have a decision that protects Americans' and Individuals' liberties and limits the federal governments power." The White House issued the following statement, "Earlier this year, the Obama Administration asked the Supreme Court to consider legal challenges to the health reform law and we are pleased that the court has agreed to hear this case."  While nearly everyone can see value in the concept of healthcare for everyone, we must all ask; "..at what cost?"  In order for ACA to work, we must allow Congress to advance its powers to a level never imagined by the Founding Fathers, or, desired by anyone today, when you fully think through the consequences of such a power grab. And, even if you could get your head around the fact that Congress (the government) now can dictate to you what type of car, food, or entertainment you must buy, there is another huge question to be addressed. When has this government ever been able to take on programs dealing with social issues and our individual well-being and deliver a well thought out, well executed anything? Just look at the fraud perpetrated on the American people in the "individual statements" sent from the Social Security Administration informing them what they should expect in payments when they retire. We can only hope that this June freedom will be affirmed and not lost.

Reports circulated this week that a breakthrough may have occurred  in the Congressional Super Committee charged with finding $1.2 trillion deficit reduction over the next 10 years. However, those reports may have been a little too optimistic. Republicans, for the first time, this week offered a proposal to put revenue increases (tax hikes), on the table in exchange for keeping the Bush-era tax cuts. Democrats reportedly rejected the proposal because it was tilted in favor of the "rich". Senator John Kerry (D-MA) was quoted in reference to the Republican plan, "It doesn't get the job done, and we've got some distance to travel." The $1.2 trillion Republican proposal for deficit reduction now bookends the Democratic $3 trillion plan to reduce deficits offered earlier. The Democrat's plan included $1.3 trillion in additional taxes and the remainder in cuts, including entitlement programs. The Republicans have rejected the Democratic plan primarily on basis that the huge tax increases are "job killing". The Super Committee must agree by November 23rd on a measure to lower the nation's deficit by at least $1.2 trillion. By December 2nd, legislative proposals must be submitted to Congress and the President. By December 23rd both houses of Congress must have voted on the committee bill. If, by January 15, 2012 the committee bill is not made the law of the land, automatic spending cuts will take effect in 2013, falling on entitlement and defense spending. With the Republicans offering up tax increases, and the Democrats offering up entitlement reform one would think that the seeds of a compromise are at hand. However, getting there will require real movement on the parts of both parties - and that movement must be toward the center, breaking the political deadlock which has gripped Washington for what seems like forever. We should all watch closely the next steps taken. Will Democrats and Republicans use their individual deficit reduction plans as leverage to beat the other side and dig in their positions? Or, will they work cooperatively to find an answer, albeit just the first step in fixing our nation's huge spending problems, and accomplish the objective they have set for themselves. If this process ends in a meaningful and realistic plan, the positive impact will be far-reaching in terms of moving our country forward on many fronts. If they fail, the results will be anything but positive. On a day when we honor the sacrifices of our veterans and their efforts to protect and preserve this country - let's hope that our representatives have the same commitment and open willingness to sacrifice the most important things for the greater good. 

A Predetermined Outcome 

We have been tracking media reports on Bank Transfer Day for several weeks in our forum. As mentioned here in the past, we believed the movement was something of consequence for both the banking and credit union industries. And, we have not been proven wrong. On Tuesday, Bank of America (BofA) announced that they will dump the $5 a month fee for debit cards, which was the primary catalyst for the movement, a move that was met with broad support from every media outlet mainstream, liberal, conservative or otherwise. However, as the president of the National Association of Federal Credit Unions (NAFCU), Fred Becker, summed it up, it might be too little too late; “Recalling debit fees now is like trying to get toothpaste back in the tube.” Our goal in casting a wide net over the media and aggregating all of the Bank Transfer Day stories in one location in our forum was to provide a complete picture of the movement for both banks and credit unions alike. The picture that emerged from this exercise was quite interesting. The media bias in favor the movement, which was measured in the number of stories for versus the number of stories supporting banks or focusing on the core reason for the increase in fees, was driven primarily by the concerted effort credit union trade groups and secondarily by the general dislike of big banks by the media. 9 out of 10 stories captured told the story of how Bank Transfer Day was the ”right thing to do”. Some even offered step by step instructions on how to move your account from a big bank to a credit union, as we saw in the Good Morning America segment from roughly a week ago. As for banking industry trade groups, the last press release from the Independent Community Bankers Association (ICBA) on the subject was from October 28th, which provided a ‘tongue in cheek’ reference to Halloween and not being afraid to switch to a community bank from a large bank. The American Bankers Association (ABA) has been almost nonexistent in the overall discussion in the media. So, we are left with the conclusion that either the banking industry didn’t have a a good story to tell (which we believe they did), or, they simply lost the media war to control the story. In the end, the reality is that the Bank Transfer Day, being founded on a misunderstanding of the entire payment system and the impact the Dodd-Frank legislation had on the overall issue, has at least for now won the day. In doing so, it has forced the hand of the large banks (and eventually all banks and likely credit unions) to not increase fees to cover the lost revenue which was transferred to retailers by Congress. And, what may be more damaging long-term, it has solidified the general public’s assertion that big banks are fee and bottom line driven before they are consumer focused. To us, this one incident represents a microcosm of today’s political and social issues environment, and provides a sad commentary on how we resolve matters as a society. The root cause, and facts surrounding this issue and others, are often lost in the sea of misinformation designed to steer public opinion away from reasons why events occur (fees rising, housing crisis, debt downgrade, massive deficits, poverty) and redirect the outcome to a predetermined reality which supports an agenda most common sense Americans would never support on the merits alone. We have two more days until Bank Transfer Day is scheduled to “happen”. Stay tuned.

Receipts of the U.S. Government for FY 2011 (trillions of dollars)

Outlays | Expenditures of the U.S. Government for FY 2011 (trillions of dollars)

Monday will be the stage for yet again another showdown between the Senate and the House over how to fund the federal government and provide disaster relief. This will be the third such showdown which has threaten to put the federal government into mothballs while our representatives struggle over how to manage the country's affairs in a manner which generates some level of confidence in their abilities to do what they were sent to Washington to manage.  The latest showdown centers on a stop gap funding measure passed by the House Friday and defeated in the Senate later that same day. The bill called for funding of the government through the first seven weeks of the new fiscal year, which starts this Saturday. The sticking point - the House bill called for $3.65 billion in additional disaster relief and included an offset of $1.5 billion from loan programs that help automakers create more clean energy vehicles - the Senate rejected the bill largely due to the $1.5 billion in offsets to pay for some of the disaster relief. As Europe continues to descend into an economic meltdown, and manufacturing reports due out this week are expected to show that China is even feeling the impact of the global slow-down, our country's leaders seem to have ignored not only what is going on around them in the world, but the fact that roughly only 10% of us approve of how they are handling the basic requirements of their job. One thing is certain this week, the battle to win the "messaging wars" over whose viewpoint on managing the country's affairs is most responsible will continue on - while the country's affairs, and indeed the country's reputation in the world, suffer equally. 

FOMC: I'll Have a Monetary Policy with a Twist
Leave it up to the Fed's Federal Open Market Committee (FOMC) to brew up a new twist in the cocktail they've been brewing to stimulate the nation's economy - that's just what they did on Wednesday. Looking to manipulate long term interest rates downward, the FOMC announced "Operation Twist". The name of the "operation" has many thinking Chubby Checker, or a new drink. Since the purpose of Operation Twist is to keep long term rates, "skinny" (or low), there is nothing "chubby" about the plan, other than what may happen to inflation in the long run. And, in the case of runaway inflation down the road, due to the Fed's manipulation of the laws of supply and demand, a new drink might be the appropriate image. Operation Twist is essentially the Fed purchasing $400 billion in long term Treasury securities with maturities of 6 to 30 years. However, unlike prior purchases where the Fed simply printed money to buy Treasury securities, this time they will sell shorter term maturities in their portfolio to pay for the longer ones. By reducing the supply of long term maturities the perceived risk is lower and therefore the rates on those securities should be lower. Since a lot of other securities take their cue from Treasury securities in terms of risk, and therefore rate - the Fed's hope is that the long term low risk, low rate message spreads, stabilizing rates at low levels and spurring on economic activity. Many have already commented that this was the Fed's only alternative at this juncture, short of printing more money and simply buying more Treasury securities. However, the Fed's monetary toolbox is now essentially empty, other than the key to the printing presses. So, if future actions are needed, the Fed may have to start ordering more green ink for future FOMC announcements. This latest round of monetary policy moves by the Fed, fiscal policy (stimulus) moves by the President, and political policy gyrations between the Legislative and Executive Branches of government - and the resulting "nothing" in the economy - has us wondering if we had it wrong all along. Maybe there's another component to stimulating the economy that is more powerful than monetary, fiscal, or political policy combined. Maybe the Individual Policy of all American's is the most powerful component to economic growth and prosperity. And, if we stimulate confidence and empower the individual to invest, start new businesses, and hire, we might find that the old three legs of the economic stool weren't nearly as important as this one. Now that's a "twist" isn't it?  

In what appears to be its first initiative to impact what financial products and services are offered through the nation's financial institutions, the CFPB announced it is seeking public and industry input on products and services offered to members of the military. In a U.S. Treasury press release on Wednesday, Assistant Director of the Office of Servicemember Affairs (OSA), at the CFPB, Holly Petraeus announced the initiative; "Military families face unique challenges when it comes to managing their finances. We believe that an open dialogue is key to addressing these challenges. By identifying the products and services that aim to assist their particular needs, our office will be able to better serve servicemembers and their families." The press release went on to identify the types of information being sought by the CFPB, which include; products and services, education, programs, homeowners assistance, and marketing and communications. This is the first move by the CFPB to gather this type of information. The press release was unclear as to what the CFPB will actually do with the information once gathered. One concerned expressed by many in the industry, as well as in Congress, is that with the CFPB's sweeping mandate granted through the Dodd-Frank Act will they will have the power to dictate to the industry a one size fits all approach related to what financial products and services are offered to the public. This new initiative could ultimately lead to an effort to mandate standard products or services offered to military members and their families, or, it could simply lead to an information gathering exercise with little to no concrete results, or anywhere in between. Watching how this program develops will be interesting, since it may provide insight into how the CFPB will conduct similar efforts in the future. The OSA is part of the Consumer Engagement and Education (CEE) division, one of six divisions in the CFPB. The other entities in the CEE include; Community Affairs, Consumer Engagement, Older Americans, and Students. The CFPB comment period is open for 14 days.

It didn't take long after the return of the Senate on Tuesday to get us back into the controversy over the CFPB and the nomination of its first director. Richard Cordray, former Ohio Attorney General, and current head of Enforcement at the CFPB, was nominated by President Obama on July 19th, two days before the scheduled official opening of the new agency. On Tuesday, he was in front of the Senate Banking Committee for his nomination hearing. In his opening statement he did his best to address the fears of the 44 Republican Senators who wrote President Obama on May 5th with their concerns over what they view as a regulatory overreach embodied in the Director of the CFPB. The letter outline the necessary reforms needed to curb the new agency's unprecedented power to control what financial products are offered to the American consumer. Essentially, the Senators want three items; to temper the power of the current independent Director with a bi-partisan committee, make the CFPB's budget subject to Congressional approval, and to place a Director or bi-partisan committee in charge that has a balanced view of consumer protection without an anti-business bias. A good portion of Mr. Cordray's comments focused on his career in local and state politics in Ohio where he saw the need to protect consumers from businesses who skirt existing consumer protection laws. Senate Republicans are holding firm with their filibuster proof threat to block the nomination of any Director nominee until their issues are addressed. As we have been reporting here for the past month, in our effort to document what it costs to oversee and regulate our nation's financial institutions, we have reviewed seven (7) federal agencies (including the CFPB), and three (3) state agencies. At every one of the ten agencies examined, in our unfinished review, we have found an apparatus dedicated to enforcing existing consumer protection laws. And, we believe that in the remaining 47 states' bank regulating agencies we will find the same. It is reasonable to assume that today, without including the CFPB, we have fifty six (56) federal and state agencies enforcing existing consumer protection laws related to financial products and services in this country. We do agree, as much of the banking industry does today, that extending the coverage of existing consumer protection laws to entities which have been exempt from such laws is a good thing. However, how many believe that one additional agency in the federal government will improve on the record of the existing fifty six in terms of protecting consumers?

Continuation of the Series: What Does it Cost to Regulate our Nation's Banks?

The 10 members of the Fed's Federal Open Market Committee (FOMC) are charged with exercising monetary policy in our country. Up until the recent economic downturn, the FOMC has cycled through a predictable cycle of monthly meetings in secret, generating decisions on monetary policy actions, or not, releasing a statement (typically cryptic) shortly after the meeting, releasing the notes or minutes from their meeting about 3-4 weeks later, and then repeating this cycle. And, until the past few years, the biggest news was whether the FOMC would raise or lower the federal funds rate by 1/8%, 1/4% or 1/2%. The monetary policy decision and the minutes from the meeting typically represented a monolithic agreement and view of what was needed to manage the "dual mandate" of the committee; to create an environment of maximum employment and stable prices. After dosing up on caffeine and reading through the 10 pages of minutes from the most recent FOMC meeting on August 9th, we can't help but think that all 10 members of the committee are opining for the "good ole days" of a 1/4% up or down decision on the federal funds rate. Roughly the first half of this document walked through a discussion on the current economic environment. During the discussion on the current environment you were hard pressed to find a silver lining in anything reported. The opening statement in the section titled "Participants' Views on Current Conditions and the Economic Outlook", wrapped up the general consensus of the group; "In their discussion of the economic situation and outlook, meeting participants regarded the information received during the intermeeting period as indicating that economic growth so far this year was considerably slower than they had expected." However, if you were then expecting the typical monolithic view of "what needs to be done next" in the minutes you would be mistaken. It would appear that while all 10 members agree that things are not as good as they had expected, that's where the agreement ends. And, "what to do next?" broke out into 3 factions of; 1) maintain the current guidance of low interest rates and low expectations through 2013, 2) index the low interest rate guidance to other economic data such as unemployment or inflation, and 3) continue the path of more monetary stimulus (print more money) to spur on economic activity. And, a few of the participants even questioned if the Fed still "had game" in influencing the economy at all with monetary policy; "In contrast, some participants judged that none of the tools available to the Committee would likely do much to promote a faster economic recovery..." What is clear in all of this ambiguity is that the FOMC is struggling with finding the right next step to manage our economy out of the current malaise with just their monetary policy "tools". However, that very issue may underscore the real answer to our economic problems. Harmony among all three components of the economic universe is needed to ensure our success, that being; monetary policy, fiscal policy, and political policy. Until this harmony is achieved, no one set of tools will fix the problems we face. 

On August 16th and 26th we had a little fun with Warren Buffett when we covered his Op-Ed in the New York Times titled, "Stop Coddling the Rich", in which he made the case that he and other millionaires are not paying enough in taxes - and that at least he wanted to pay more in taxes (we didn't see a bandwagon of others in his same financial position running up to join Warren in this cause). His Op-Ed then became part of the President's talking points for his recent Midwest bus tour, and was widely reported on in the nightly news by the major networks, with a few of these networks going out of their way to post the Op-Ed on their web sites. In our August 16th article we debunked the myth that all we needed to do was to raise taxes on the rich to fix our spending problem in the country. And, in our August 26th article, we pointed out that Warren appeared to be functioning in the role of campaign assistant to the President (maybe uncovering some of the motive for his recent public statements). Well, yesterday something happened that made this whole episode worth reporting on - again. It was widely reported in many news sources (although not mentioned on the nightly news) that Warren Buffett's company Berkshire Hathaway has had its own problems paying taxes in a timely manner. In fact, several sources reported that Berkshire Hathaway owes back taxes to the U.S. Treasury from 2002 to 2009 totaling at least $1 billion. We found the tax liability disclosed on page 56 of Berkshire Hathaway's 2010 Annual Report. Within the disclosure in their annual report Berkshire Hathaway notes several times that they expect to clear up the taxes owed "...in the next 12 months." We think we may have just uncovered another motive for Warren's recent public statements on this topic. He is seeking a top position in the Administration. It has been an apparent requirement that in order to land a top job in the current Administration you need to be a proponent of higher taxes, while not paying them yourself. Here are a few examples; Nominees for Labor Sec., Health and Human Svc Sec., Chief Performance Officer. Second nominee for HHS Secretary, Sebelius, has tax issues.  U.S. Trade Rep nominee has tax problems. And, last but not least, US Treasury Sec. Nominee - Geithner's tax issues.

Continuation of the Series: What Does it Cost to Regulate our Nation's Banks?

On August 4th, 12th, 17th, 18th, 19th, 22nd, and 25th we reviewed the Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), the Texas Department of Banking (TDB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Tennessee Department of Financial Institutions (TDFI) in our journey to discover how much it costs to regulate our nation's financial institutions. Today we continue our journey and examine the Nebraska Department of Banking and Finance (NDB&F). According to the NDB&F's 2010 Annual Report the agency lists its first leader as Richard H. Townley in 1892. The NDB&F currently provides oversight through two divisions, the financial institution division and the securities division. Within the financial institution division the NDB&F oversees 719 entities made up of the following types of institutions; State Chartered Banks - 178, S&Ls - 1, Credit Unions - 19, Trust Companies - 3, Delayed Deposit Services - 116, Installment Loan Companies - 14, Sales Finance Companies - 106, and Mortgage Bankers - 282. Within the securities division the NDB&F oversees 80,783 advisors and entities made up of the following; Broker Dealer Agents - 74,970,  Broker Dealer Firms - 1,425, and Investment Advisors - 4,388. In the fiscal year ended June 30, 2010 the NDB&F issued fines and penalties totaling $589,444, with the bulk of these penalties, $509,844, being imposed on financial institutions. The NDB&F, like all regulatory bodies we've examined, except for the CFPB, is funded solely from assessments and fees from the entities they oversee. For the fiscal year 2010 the agency generated revenues of $5.0 million from financial institutions, and $24.8 million from securities entities they oversee for a total of $29.8 million. In fiscal 2010 the NDB&F had total expenditures in the financial institutions oversight division of $4.7 million (83% of this amount represents employee S&B), and in the securities division expenses totaled $1.3 million (84% of this amount represents employee S&B), for a total of $6.0 million. In fiscal 2010 the NDB&F had 42 FTE in their financial institution division, 13 FTE in administrative roles, 10 FTE in the securities division, and 10 FTE in the legal division for a total of 75 FTE. The NDB&F transferred $24.0 million to the State of Nebraska General Fund at the end of fiscal 2010. While the NDB&F has a consumer hotline, we were unable to determine the number of consumer complaints received or resolved as we did with other state agencies. The total cost to operate the NDB&F per week is $573,000, including the amount assessed to the industry which was remitted to the State's General Fund. When we add the NDB&F's cost to the previously examined bank regulatory agencies the weekly cost thus far to regulate the nation's financial institutions is $124.2 million, or $6.5 billion per year. Stay tuned as we continue to our examination of government agencies who oversee our nation's financial institutions. 

Federal Reserve Chairman Ben Bernanke made a pointed effort to hand the baton for the economic recovery to Congress and the Administration in his speech at the annual Kansas City Fed's Economic Symposium in Jackson Hole, WY this past Friday. However, he also sent the message that the Fed still has a few "tools" left to employ if their actions don't measure up in creating economic stability and growth. A good deal of his speech was occupied with making statements to reassure everyone listening that the long term prospects for the U.S. economy remain positive, provided the right near term steps are taken to foster stable growth. He also made the point about half way through his speech that the Fed still has game when it comes to monetary policy. Bernanke restated that the Fed has revised its understanding that the economic downturn has been more severe than originally thought and that "....the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus."  He went on to say, "We will continue to consider those and other pertinent issues....in our meeting (FOMC) in September, which has been scheduled for 2 days (versus the typical 1 day)." Later in his speech he then made direct comments pertaining to what he sees as the proper next steps for fiscal policy. In other words, what Congress and the Administration should be considering and more importantly, doing. Bernanke laid out three specific steps to be considered: 1) "To achieve economic and financial stability, U.S. fiscal policy must be placed on a sustainable path that ensures that debt relative to national income is at least stable or, preferably, declining over time." 2) Fiscal policymakers can also improve stronger economic performance through the design of tax policies and spending programs. He went on to say, "...our nation's tax and spending policies should increase incentives to work and to save, encourage investments in the skills of our workforce, stimulate private capital formation, promote research and development, and provide necessary public infrastructure." 3) "Finally, and perhaps most challenging, the country would be well served by a better process for making fiscal decisions." Bernanke goes on to scold Congress and the Administration over the debt ceiling debate, commenting that future episodes like this could "...seriously jeopardize the willingness of investors around the world to hold U.S. financial assets...." Bernanke then provided some further direction to his final point, "Although details would have to be negotiated, fiscal policymakers could consider a more effective process that sets clear and transparent budget goals, together with budget mechanisms to establish the credibility of those goals." While providing guidance and opening the door to allow Congress and the Administration to take the next swing at fixing our economic woes, Bernanke then ended his speech with this sentence, "The Federal Reserve will certainly do all that it can to help restore high rates of growth and employment in the context of price stability." Congress is due back from its recess, which ends on September 5th. And, it has been reported that the President is about to make a policy speech concerning further fiscal actions the government will take to stimulate the economy. Let's see how many of Bernanke's three points get addressed in September before Ben breaks out the Fed’s "tools". 

We imagine Warren's to do list looks something like this; 1) Talking Points for the President - "Check", 2) Rescue Bank of America and Make a Bundle - "Check", 3) Hold a Fund Raiser for the President - "Next", 4) Reconcile what I know about business, spending, and revenues with my position on taxes - "Next". As we discussed on August 16th, Warren Buffett set the President up for his Midwest bus tour by publically stating that he and the rare group of Americans that make over $1 million a year are not paying enough taxes. And, while most of us have no problem with his desire to do more, his offer has two significant problems. First, our nation's issue is with spending, not taxing. We could take 100% of the earnings of those who make more than $1 million a year and it would still leave the rest of us paying 70% of our annual income just to come close to balancing the budget each year. Second, while Warren talks a lot about why he should pay more - to our knowledge he has not yet clicked on this link on the U.S. Treasury web site - Gift Contributions to Reduce the Debt Held by the Public and put his money where his mouth is. However, he checked off the rescue of Bank of America yesterday while making a very sweet deal for himself in the process - read about this here. And, it was announced yesterday that plans are underway for an "economic forum" in New York where Warren will host a fundraiser for the President with general admission (cheap seats) set at $10,000 a piece with VIP tickets running $35,800 each. It was also reported that Austan Goolsbee, the President's economic plan architect, will co-host the "economic forum" with Warren. It would be worth almost $36k just to hear Austan explain the 'genius' behind the administration's economic plan. We have no issues with Warren's backing of the President, in fact he moved from the Republican to the Democratic Party to find ways to help the less fortunate (which for Warren is the rest of the 310.999 million of us). However, after the fund raiser is over and he gets to the fourth item on his to do list, he will either have to ignore it, or we won't hear from him for quite some time.  

Continuation of the Series: What Does it Cost to Regulate our Nation's Banks?

On August 4th, 12th, 17th, 18th, 19th and 22nd we reviewed the Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), the Texas Department of Banking (TDB), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) in our journey to determine how much it costs to regulate our nation's financial institutions. Today, we continue this journey and examine the Tennessee Department of Financial Institutions (TDFI). As we discussed in our review of the Texas Department of Banking, banks can be chartered on the federal level (i.e. "First National Bank of .....") or, by the state in which they reside (i.e. "State Bank of ...."). Banks that are chartered by the state are subject to oversight by that state's banking regulators. According to the TDFI's 2010 Annual Report the agency was established in 1913 and currently provides oversight to the following entities; State Chartered Banks - 156, State Chartered Credit Unions - 109, Trust Companies - 9, Business and Industrial Development Corporations (BIDCO) - 2, Industrial and Thrift Companies - 980, Insurance Premium Finance Companies - 59, Mortgage Companies - 596 (plus 680 mortgage branches) and Mortgage Loan Originators - 5,776, Check Cashers - 628, Deferred Presentment Service Companies - 1,276, Money Transmitters - 61, and Title Loan Companies - 835. In all, the TDFI oversees 10,891 entities within the state. In the calendar year 2010 the TDFI required the entities they oversee to refund back to consumers approximately $1.5 million for violations, with Mortgage Companies refunding the bulk of this amount at $1.2 million. The TDFI, like all regulatory bodies we've examined, except the CFPB, is funding solely from assessments and fees from the entities they oversee. For the fiscal year ending June 30, 2010 the agency generated revenues of $17.05 million. The top three contributors to revenues were; Bank Assessment Fees - $8.6 million, Mortgage Company Fees - $2.5 million, and Credit Union Fees - $2.2 million. In fiscal 2010 the TDFI had expenditures of $14.1 million, with the bulk of this being employee salaries and benefits for their 146 employees of $10.7 million (76%). There was excess revenue to expenses in fiscal year 2010 of $2.9 million, of which $1.6 million was rebated back to banks, and, $1.3 million was contributed to the State's general fund. Like every bank regulatory agency we've examined thus far the TDFI receives and processes consumer complaints. In fiscal year 2010 the TDFI processed 515 formally filed complaints from 70 of the 95 counties within Tennessee, which directly led to consumer refunds of $125,585. Utilizing the total revenues generated by the TDFI, less the rebate back to the banks, the cost per week to run the TDFI is approximately $297,115. When we add the TDFI's cost to the previously examined bank regulatory agencies the weekly cost thus far to regulate our nation's financial institutions is $123.6 million, or $6.43 billion per year. Stay tuned as we continue our examination of government agencies who oversee our nation's financial institutions.  

On Tuesday a federal judge denied a request to dismiss a $10 billion lawsuit against the FDIC by Deutsche Bank National Trust Company stemming from the failure of Washington Mutual bank (WaMu) in September of 2008. WaMu was seized by the Office of Thrift Supervision, creating the largest bank failure in U.S. history. The FDIC was appointed receiver of WaMu and quickly sold the failed bank to JPMorgan Chase for $1.9 billion. At the center of the lawsuit is the claim by Deutsch Bank that WaMU pooled mortgage loans for sale as securities that did not meet the underwriting standards they claimed. The FDIC requested dismissal, stating that Deutsche Bank should be pursuing JPMorgan Chase. A JPMorgan Chase spokesperson denied that they had assumed any lawsuit liability with the acquisition of WaMu. The lawsuit by Deutsche Bank comes 4 months after the Department of Justice filed a $1 billion lawsuit against Deutsche Bank for "egregious" violations of FHA lending standards. By allowing the suit against the FDIC to proceed, the federal judge opens the door to potentially numerous other similar lawsuits where the FDIC is made a defendant to investor groups who purchased failed institutions who had questionable underwriting and securitization processes prior to the mortgage meltdown. And, since the FDIC is totally funded by the banking industry, if the suit is successful and the FDIC is found liable, wouldn't the Deutsche Bank investor group be taking from other industry investors (ironically including Deutsche Bank investors) to settle claims? One would have thought that the FDIC would have already closed all avenues to be sued in their role as receiver of failed institutions and match maker with other industry players. However, the denial of this dismissal request shows, at the very least, that the lawsuit protections in place at the FDIC have weaknesses. It will be interesting to see if any "horse trading" occurs between the DOJ $1 billion lawsuit against Deutsche Bank and the Deutsche Bank $10 billion lawsuit against the FDIC.  

While planning today's article I recalled a quote from a former boss from my days in banking and someone I consider a current mentor of mine. He said to me one day while we were looking over a complaint from a consumer who was not granted credit - "...there used to be a day when credit was something you earned, nowadays it is considered by most as a right."  I fast-forward that comment some 25 years into the present situation our country finds itself in and I can make the same argument over a host of other topics beyond credit, including; housing, healthcare, food, and saving for retirement. How did we become a nation where 30,000 students are on food stamps in Michigan?  If you read the article it has an interesting argument why food stamps for college students are needed. The promise that things we use to have to work for are now somehow "rights" has lead us to this state. And, when you think about it, the promise is very addicting in and of itself. In order to make this all work, you first have to think of the government as an entity in and of itself - and more importantly an entity which does not made up of each and every one of us. You must totally disconnect the thought that what the government has - can only be what it takes from us. Once most believe that the government is not made up of yourself and your neighbors the necessary disconnect to take advantage of it has been laid. However, that is only the foundation for the promise. The larger promise is that your better life is only a few steps away - and more importantly it is your right to take it - and others (the government) are there to help. With nameless and faceless supporters a majority of the population can easily be persuaded to get more from the "government". Imagine for one moment what would happen if everyone had to admit that in order to create a better life for yourself - you had to take from your neighbor - instead of the government? Would most choose the path of work or handouts for betterment of their livelihood? As we have written about similar topics in the past, comments have been made on our articles and posts which state that most Americans believe in the principles of hard work and reject any form of state sponsored socialism. To which all (most) cheer on as the remnants of our proud and hardworking society. To get another perspective on this issue, let's look across the pond to the United Kingdom, one of our closest allies in most international matters. The UK's history with welfare dates a bit farther back than our own. Some would put the modern era of welfare in the early 1900s other place it in the 1940s right after World War II.  This recent article in the Daily Mail - UK provides a very interesting twist on the housing aid provided by the British government. As it stands today, those who actually work in positions as junior banker, or policeman in Britain and pay taxes cannot afford the same level of housing as those on public assistance. If you read that article, I don't think you'll have to stretch your imagination too much to see the same back and forth over housing benefits here in the states in the not too distant future. And, this Op-Ed in the Washington Post by George Will - Britain Tackles the Welfare State - identifies that 1 in 5 households in Britain now have no wage earners at all. The promise that someone else will take care of your needs is a very alluring one. And, that promise has been too good to resist in other countries - as it is potentially here in our own country - unless we reconnect the message of who the government is - and what it is not.

Continuation of Our Series: What Does it Cost to Regulate the Nation's Banks? 

On August 4th, 12th, 17th, 18th, and 19th we reviewed the Consumer Protection Financial Bureau (CFPB),  the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), the Texas Department of Banking (TDB), and the Federal Deposit Insurance Corporation (FDIC) on our journey to determine how much it costs to regulate our nation's financial institutions. So far, we have identified a weekly cost of $105.0 million, or, $5.46 billion annually for the agencies examined. All of the agencies examined thus far have focused on national and state chartered banks and savings and loans. Today, we shift to the agency which oversees the nation's federally insured credit unions, the National Credit Union Administration (NCUA). In 1970 the NCUA became an independent federal agency. The NCUA charters, insures deposits and supervises federal credit unions throughout the United States and it's territories. Like the FDIC, the NCUA increased the amount of insurance for depositors from the historic level of $100,000 to $250,000 per insured depositor. According to the latest annual report on the NCUA's web site - NCUA 2008-2009 Annual Report, there are approximately 7,800 federally insured credit unions in the U.S.  Like the FDIC, the NCUA manages the deposit insurance fund, the National Credit Union Share Insurance Fund (NCUSIF), for member institutions. Funding of the NCUSIF comes solely from the member credit unions - and not the taxpayers. All federally insured credit unions are required to deposit 1% of their share (deposit) balances in the NCUSIF. The insurance fund then utilizes this money to invest and generate income. In addition, NCUSIF can also assess special premiums on federally insured credit unions to maintain a proper balance in the fund to offset expected losses from failed credit unions. In 2009, a special premium was assessed for the first time in several years. That premium generated approximately $728 million in additional funding. The special assessment continues on through the present, however, we were unable to locate hard dollar reports on the amounts being generated from this assessment beyond that reported in the latest annual report from 2009. Assuming that the amount of the special premium has not change significantly over the past few years, we used the 2009 special premium total of $728 million and added this to the 2011 approved operating budget of NCUA of $225.4 million, to obtain an estimated total cost to operate NCUA and the insurance fund of approximately $953 million annually. This total excludes the opportunity cost of 1% of their total shares (deposits) that insured credit unions are required to deposit into the fund. The NCUA formed the Office of Consumer Protection in 2010 to address consumer complaints on credit unions. Due to the newness of the office we were unable to locate reporting of complaint volumes on credit unions. Using our estimated annual cost to run the NCUA of $953 million, the NCUA consumes approximately $18.3 million per week. Adding the NCUA's cost per week to the OTS, OCC, CFPB, TDB, and the FDIC we have a total weekly run rate of $123.3 million, or $6.41 billion per year. Stay tuned as we continue our examination of government agencies who oversee our nation's banks and credit unions. With some of the big players already included in our review, what do you think the total is to regulate our nation's financial institutions?

Continuation of Our Series: What Does it Cost to Regulate the Nation's Banks? 

On August 4th, 12th, 17th and 18th we reviewed the Consumer Protection Financial Bureau (CFPB),  the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), and the Texas Department of Banking (TDB) on our journey to determine how much it costs to regulate our nation's banks. So far, we have identified a weekly cost of $30.0 million, or, $1.56 billion annually in the agencies examined. Today, we take a brief look at a large regulatory agency, the Federal Deposit Insurance Corporation (FDIC). The FDIC was formed as an independent agency of the government in 1933, in the wake of thousands of bank failures that occurred in the 1920s and early 1930s. Since the start of the FDIC insurance on deposits on January 1, 1934, depositors in covered banks have not lost a single cent due to a bank failure. During the recent economic downturn in the U.S., the deposit insurance total was increased from the historic level of $100,000 to $250,000 per insured depositor. According to the FDIC Annual Report 2010, the FDIC directly examines and supervises more than 4,900 banks for operational safety and soundness. Of all the agencies we've reviewed thus far the FDIC is unique in one way, it is the actual insurance agency for the deposits held at the nation's banks and thrifts. As such, its annual budget includes three components; 1) a general operating budget, 2) a receivership budget, and 3) an investment budget. The receivership budget includes funds held to "resolve" failed institutions. Resolving an institution entails making the depositors whole up to the insurance cap if necessary, and assisting in the disposition of the failed bank. Disposition usually, but not always, ends with another bank acquiring the deposits and other assets of the bank in a sale facilitated by the FDIC and the appropriate chartering agency. The 2011 budget for the FDIC was a whopping $3.9 billion. The 2011 budget is broken down as follows; Operating Budget = $1.7 billion, Receivership Budget = $2.2 billion, and Investment Budget (for ongoing improvement projects at the FDIC) = $6.7 million. The FDIC does not rely on the taxpayers directly for funding. Nearly all the FDIC's funding comes from assessments (charges) made on the nation's banks and thrifts. The remaining sources of funds are from investments made by the FDIC and fines and fees assessed on banks. The 2011 budget had an approved FTE level of 9,252. In 2010 the FDIC dealt with 154 bank failures and conducted 7,776 examinations of banks. And, the FDIC like all of the other agencies we've looked into, takes consumer complaints through their eight offices. In 2010 the FDIC responded to 13,252 written complaints from consumers. When we add the FDIC's cost per week to the OTS, OCC, CFPB, and the TDB we have a total weekly run rate of $105.0 million, or $5.46 billion per year. Stay tuned as we continue our examination of government agencies who oversee our nation's banks and credit unions. With some of the big players already included in our review, what do you think the total is to regulate our nation's banks?  

Continuation of Our Series: What does it Cost to Regulate the Nation's Banks? 

On August 4th, 12th and 17th we reviewed the Consumer Protection Financial Bureau (CFPB),  the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS) in our journey to determine how much it costs to regulate our nation's banks. So far, we have identified a weekly cost of $29.55 million, or, $1.54 billion annually in the three agencies examined. Today, we jump outside of the federal regulatory agencies for just a bit, and look into a state banking regulator, the Texas Department of Banking (TDB). As you may know, banks can be chartered either by the federal government (i.e. "First National Bank of...), or, by the state in which they reside (i.e. "State bank of...). Banks that are chartered by the state are subject to oversight by that state's banking regulators. TDB, according to their 2010 Annual Report, oversees 314 Banks, 20 Independent Trust Companies, 10 Foreign Banks (with offices in TX), and 403 Prepaid Funeral Licenses, 244 Perpetual Care Cemeteries, and 133 Money Services Businesses. As with the OCC and the OTS, the Texas Department of Banking receives nearly 100% of its revenue through assessments of fees on the banks and other entities it supervises. In 2010 the TDB took in revenues of $23.6 million and incurred expenses of $22.9 million, with $15.5 million of the total expenses representing salaries and wages for its 196 employees. Like every other bank oversight agency we've looked into TDB also takes consumer complaints. In 2010 they processed 5,483 complaints, of these 67% of the complaints were on their state chartered banks. The cost per week to run the TDB is approximately $450,000. When we add the TDB's cost per week to the OTS, OCC and CFPB we have a total weekly run rate of $30.0 million, or $1.56 billion per year. We will look into other state banking regulators in the future to determine how Texas compares with other states. Stay tuned as we continue our examination of government agencies who oversee our nation's banks and credit unions. As we continue, what do you think all 50 states will cost?    

Continuation of Our Series: What does it Cost to Regulate the Nation's Banks? 

On August 4th and August 12th we examined the Consumer Protection Financial Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) respectively in our ongoing series of articles examining the federal and state agencies which regulate our nation's banks. Today we move onto an agency, the Office of Thrift Supervision (OTS), which actually no longer exists as a standalone regulatory body. However, the responsibilities and activities of the OTS continue on within the OCC since the OTS merger with the OCC on July 21, 2011. This merger was part of the implementation of the Dodd-Frank Act, which overhauled the regulatory framework of the financial services industry. In our prior articles we identified that the CFPB has an estimated annual budget of $500 million and the OCC had a "budget authority" of $792 million, which left our running total at $1.3 billion per year. The OTS was created in the wake of the Savings and Loan (S&L) Crisis which dramatically transformed S&Ls during the 1980s - 90s. Roughly 2/3 of the S&Ls made it out of the crisis (meaning they didn't fail) and the OTS was created by Congress to oversee and supervise these institutions much like the OCC does as a regulator for national banks. Since the S&L crisis thrift institutions have continued to morph into "bank-like" entities to the point of most dropping references to "savings", or "loans" in their name in favor of the word "bank". According to the FY 2009 Budget and Performance Plan for the OTS (the most recent complete plan for the OTS), the annual expense of the agency was $247 million. The OTS, like the OCC, derives 92% of their funding from Assessments on the institutions they supervise. The remainder of their funding came in the form of interest, rental income and fees. So, there was no direct taxpayer funding of the agency, unlike the CFPB. The OTS had 1,095 FTEs (compared to the OCC with 3,101 and the estimated 1,000 in the CFPB) located in their headquarters in Washington, D.C. and five regional offices located in Atlanta, Chicago, Dallas, Jersey City and San Francisco. And, much like the OCC and the CFPB, the OTS was an agency responsible for handling consumer complaints. Although their FY 2009 report did not disclose the number of complaints received or resolved. The merger of the OTS into the OCC was one of the bright spots in the implementation of Dodd-Frank, in that it delivered on the promise to simplify the regulatory landscape for financial institutions. If it wasn't for Congress's creation of the CFPB as part of the Dodd-Frank, we would have actually reduced the number of federal government agencies overseeing our banks. As it happened we swapped out the merger of the OTS and OCC for the creation of the CFPB. At this time it is too early to tell of the $247 million in expense will simply shift to the OCC, or, if the merger with the OCC will create efficiencies which will lower the cost of supervising the remaining S&Ls in the country. Since we can assume that the assessments (where the OTS receives 92% of its funding from) will continue on, we are going to add this amount to our running total of costs to regulate our nation's banks. The cost per week to run the OTS was a paltry $4.75 million. When we add the OCC's cost per week of $15.2 million and the estimated weekly cost to operate the CFPB of $9.6 million we have a total weekly run rate of $29.55 million, or $1.54 billion per year. Stay tuned as we continue our examination of government agencies who oversee our nation's banks and credit unions.   

We didn't plan on talking strictly taxes for two days in a row. However, Warren Buffet's Op-Ed in the New York Times titled, "Stop Coddling the Super Rich" was too much to resist. Yes, Warren was back in the public eye once again telling everyone he isn't paying enough taxes. And, this time he provided us some real numbers to play with - and you know we like that. For starters he is upset that he only paid $6.9 million last year which equated to 17.4% of his income. Meaning, he made about $39.7 million last year. Not bad, since he seems to equate his method of making money (investing) something akin to a Sunday fox hunt, or more directly a sport. If his own estimates are correct, that would place him in the rarefied air of the top .3% of all earners in the United States. And, we say, good for Warren! And, to be fair he does clearly point out that he wants households making more than $1 million to take on a bigger share of the burden than they do today. Unlike others, who have loosely tossed about the "millionaire" title and attached it to anyone making more than 25% of a million a year (the dreaded $250k income level). So, let's take Warren at his word and put him and the other 236,882 households that make more than $1 million a year to task and have them solve our fiscal problems. Starting with the baseline that the government spends $3.5 trillion every year, let's figure out how much we need to "soak the rich" to pay for our spending addiction. We need to assume an average income for all of the households making more than $1 million, and from Warren's own estimates there are only 8,274 of that group making more than $10 million a year - so that helps. Assuming an average household income of those between $1 - $10 million per year of $2.5 million, and for those $10 million + an average of $16.5 million per household, this group of top earners have a gross income of approximately $704 billion per year. If we took it all (100%), to help offset our annual government spending of $3.5 trillion, their very patriotic contribution to our spending would equate to only 20% of the total. This would leave a $2.8 trillion tab of annual government spending for the rest of the estimated 79 million households in the U.S. to pay.  With an average household income of $50,233, "the rest of us" generate approximately $3.9 trillion in gross earnings a year. So, after we stop coddling Warren and all of his "Super Rich" friends by taking 100% of their annual gross income in taxes, the rest of us owe 70% of our annual gross incomes to the government to pay for the current level of spending. Doesn't sound so good anymore, right? To underscore the message - it is not the level of taxes - it's the level of spending our government has carelessly gotten us all into. We can't tax our way out of this unless we all want to join Warren and the rest of his buddies and give up nearly all of our income to pay for promises "We The People", via our elected representatives, have already made. So, can we stop the nonsense over how taxes (especially "taxing the rich") will fix this problem - and get to the real issue of cutting spending? And, if you ask, "...cut spending by how much?", simply figure how much you want to pay in taxes. As a starting point, if we assume that we will take 100% of the income of the rich, "soak the rich", (ridiculous I know - but we are taking that phrase off the table), and we all chip in 25% of our earnings, that would mean the government could spend $1.7 trillion a year and we would actually be paying for what we consume without passing debt onto our children. That would mean a cut in government spending of $1.8 trillion or just over 50%. However, we started with the story about Warren wanting to pay more than the paltry $6.9 million last year. To respond to his request to stop coddling him, we politely direct him to this page on the U.S. Treasury web site, Gift Contributions to Reduce Debt Held by the Public where he can donate as much as he would like until his conscience is clear. I wonder how much he will contribute? 

That was the question - and the answer - heard around the political spectrum of the 2012 presidential campaign emanating from the Iowa Straw Poll this past week. A heckler, reportedly from a left leaning think tank, was the instigator, and Mitt Romney provided the "answer", creating a very interesting debate for all Americans to consider. Democrats jumped on Romney's answer equating corporations with people as the exact reason why republicans don't get it. Republicans used the moment to point out the fact that corporations are not evil entities run by aliens - but by people who voluntarily come together for a purpose. And, if they are successful in producing goods or services other people want to buy they will likely generate a profit. To produce those goods or services the corporation will need to hire people, and finally they will pay taxes on their profit. Ah, taxes....that's the issue. The heckler in Iowa wanted Romney to commit that he would tax corporations more. Obviously, the heckler did not realize that the United States' 35% corporate tax rate is already one of the highest in the world. A quick scan of the world finds the following countries with a 35% or higher corporate tax rate: Angola (35%), Argentina (35%), Bangladesh (45%), Benin (35%), Burundi (35%), Cameroon (38.5%), Gabon (35%), Guyana (35%), Japan (40.69%),  Malta (35%), Pakistan (35%), Sri Lanka (35%), and Zambia (35%). In fact, of the 116 countries in the world we looked into, only 14 (including the United States) had a corporate tax rate of 35% or higher. And, of these countries, only 3 had a corporate tax rate greater than 35%. So, what does this all have to do with corporations being people or not? Well, the answer surprisingly is found in how "people's" jobs shift according to the corporate tax rate. Let's take a look at just one country, Ireland, with their 12.5% corporate tax rate and how many "American" sounding companies have operations there. Microsoft employs 1,220, generated $11.4 billion EU ($15.3 billion USD), and had a net profit of $1.3 billion EU ($1.7 billion USD) in 2010. And, the list of companies you would recognize with Ireland operations continues on; Dell, Google, Oracle, Symantec, Adobe, Siemens, Hewlett Packard, Ericsson, Creative Labs, Novell, Red Hat, Phillips, eBay, SAP, Sun Microsystems, Facebook, Logitech and others. We can all easily admit that these corporations, and indeed all corporations, are obviously not a "person", but corporations are made up of people, and more importantly they employ "people". And, it is a fact that our current corporate tax rate is a significant negative incentive for corporations to do business in the United States. While many corporations maintain operations in the U.S., many have shifted some or a great deal of their operations somewhere else to avoid the high taxes they face within our borders. And, with those shifts goes jobs for people. There is one last issue with our corporate tax structure to consider. If a corporation decides to bring back the profits made abroad, they will be taxed at the 35% rate. Because of the cost to repatriate those profits, the top ten American companies with profits overseas are sitting on $346 billion in profits that will never make it back to our country to hire American's and grow our economy.  Yes, technically, corporations are not people they are just a legal entity. But, just like a person, if you create an environment where it is difficult to exist, they will find someplace else to exist. So, should we increase the taxes on our corporations?

Continuation of Our Series: What does it Cost to Regulate the Nation's Banks?

On August 4th we provided a quick examination of the Consumer Financial Protection Bureau (CFPB) two weeks after its official launch (see our Blog for this post). The CFPB is the new regulatory agency designed to protect consumers, address consumer complaints, and champion financial services regulation for the protection of consumers. We noted that the CFPB $500 million a year budget consumes an estimated $9.6 million per week. And, from our review of the web site and other activity from the agency we, as taxpayers, didn't seem to be getting a lot of bang for our buck (which in an odd way might be a good thing). Today, we move onto the Office of the Comptroller of the Currency (OCC) and continue our examination of government agencies charged with regulating, examining, and overseeing financial institutions. According to the OCC's Annual Report for Fiscal Year 2010, the OCC "budget authority" is $792 million of which they derive 97% of their revenues by charging the national banks and federal savings institutions an assessment. The OCC has 3,101 employees (versus the estimated 1,000 in the CFPB) and they have 66 offices (including one in Great Britain). And interestingly enough, the OCC received 80,336 consumer complaints and closed 79,660 (isn't this what the CFPB is supposed to be doing?). The OCC was established in 1863. Its primary role is to; a) examine and provide regulatory oversight to national banks and federal thrifts, b) approve or deny applications for new banks, branches, or changes in a bank's structure, c) take supervisory actions against national banks and federal thrifts when they are not complying with laws and regulation, and d) issue rules and regulations, legal interpretations pertaining to banking issues.  By law the OCC cannot release information from its examinations of banks to the public, so we cannot comment on the activity in this area of the OCC's responsibility. On their web site the OCC offers a number of Publications, as well as, a few Tools for bankers and consumers. Being funded nearly 100% by assessments, and from charging banks and thrifts for their examinations - the OCC does not draw money from taxpayers for its operations. Contrast the OCC funding with the CFPB which obtains 100% of its funding directly from the Federal Reserve (i.e. taxpayers). The cost per week for the OCC to operate is approximately $15.2 million. When we add the $9.6 million per week from the CFPB we have a total, thus far, from government agencies that oversee the nation's financial institutions of $24.8 million per week, or, $1.3 billion per year. Stay tuned as we continue our examination of government agencies who oversee our nation's banks and credit unions.

On Wednesday, the U.S. Treasury, the Department of Housing and Urban Development (HUD), and the Federal Housing Finance Agency (FHFA) issued a very interesting Request For Information (RFI). So, what problem is our government trying to solve by looking for input from the public? It would appear that our government's policies for the past thirty years have put them in the role of Chief Landlord - something they didn't see coming. Freddie Mac, Fannie Mae, and FHFA (in other words the taxpayers of the United States) now own a huge portfolio of foreclosed and distressed properties and Uncle Sam needs help in figuring out what to do with all of those properties. Taking this issue seriously we set about to provide the "information" sought by our government on this issue. In order to properly address and resolve the problem the government seeks to fix, we must start at the root of the problem. This will cause us to reflect on the legislation passed in 1977 under President Carter, called the Community Reinvestment Act (CRA), and, then, on the Affordable Housing legislation and initiatives of administration's from Clinton and Bush ("HW" and "W") to the present, with the full support of all major political parties. These initiatives, while sounding honorable and good, gave rise to the government guaranteeing mortgages and the emergence of Freddie Mac (FHLMC) and Fannie Mae (FNMA), the Government Sponsored Entities (GSE) we hear so much about today. While it took a few decades, the government put in place all the pieces required to create the problems we face today. Let's see how, by starting with those "greedy" banks. Banks, to this day, are examined by government regulators for CRA compliance and the results of these examinations are made public. If a bank is not "reinvesting" in its community, in other words making mortgage loans (and other loans) to borrowers who can't afford them, they will receive a poor examination rating and are typically barred from doing things banks do to grow and survive - like acquire other banks, and open new branch offices. So, the banks made loans to those who could not afford them, and as a result created additional demand in the housing market - which we all know - causes prices to increase. But everyone was happy. Then the banks said, "We can't make all of these bad mortgages you are forcing us to make and remain in business." So the government decided to help. They created a mechanism for the banks to "sell" their mortgages to Freddie Mae, Fannie Mae (the GSEs). Within the GSEs, the government said they will guarantee those mortgages, and thus created the ability for the GSEs to turn these mortgages into Mortgage Backed Securities (MBS) for investors around the world to buy. And, the rest is history. But, since the government asked for help, we want to respond directly to the RFI with the following: 1) Terminate the enforcement of CRA, 2) Don't use the good faith and credit of the United States of America to back the loans made in the private sector, 3) Get out of the business of buying and packaging private sector loans into securities, by dismantling the GSEs, and 4) Sell off the housing you've acquired due to these ill-conceived policies - and don't include any reference to "affordable housing" in these efforts. Maybe one day the truth will come out about the mortgage mess - and we will all see that government intervention into free markets only creates short term false positive reactions and long term dire consequences. But don't hold your breath - too many who had a hand in this mess are still in office and being reelected.   

The Federal Reserve's Federal Open Market Committee (FOMC) is charged with setting, announcing and executing the monetary policy of the U.S. Government. FOMC meetings have been highly anticipated as of late (meaning the past several years) as our economy seesaws back and forth (mainly back). Usually, the announcements from the FOMC are made in typical "Fed-ease". Meaning, everyone guesses what the committee really knows, and what the committee's actions mean for the entire week, and indeed sometimes the entire month, until the next committee meeting.  Yesterday's announcement was no exception. However, the clarity in which the statement was made did raise a few eyebrows. Quoting from the FOMC statement; "...the Committee decided today to keep the target range for the federal funds rate at 0 - 1/4 percent. The Committee currently anticipates that economic conditions - including low rates of resource utilization and a subdued outlook for inflation over the medium run - are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013." That last part of the statement, "...at least through mid-2013" is the source of the eyebrow raising. The FOMC statements to this point would have used the phrasing "...for an extended period of time," following prior precedent. However, the Fed decided to clearly place its chips on the table and state that the economy doesn't look like it will recover until sometime - after the 2012 elections. One could take the cynical view on this move by the Fed and assume that they just signaled that until there is a change in the White House, things won't get better. But that would be a pretty wild approach on the part of the Fed, right? Or, one might assume that this move by the Fed just removed one variable (the Fed's independence in setting monetary policy) President Obama has to deal with concerning the economy, and this might make it easier for his Administration to chart a course for the election and fiscal policy through the election. Or, to play devil's advocate, the Fed may have just told the Administration and Congress that if they can't create stability and some confidence in government's economic decision making that they will do it for them. In any case, the markets seemed to run through all three (and likely more) of these scenarios as the Dow Jones dropped 176 points right after the announcement and then closed up 429 points by the end of the trading day. Although, we have to add, there was a collective sigh of relief that another round of Quantitative Easing (Fed printing money to buy more of our own Treasury debt) wasn't on the prescription pad for our economy. The wild ride on the stock market and the gains at the end of the day seem to defy the fact that the Fed clearly stated that our economy is in worse shape than they initially thought - and it is going to take a couple more years before we see an improvement. However, we all know that the real impact of the Fed's decisions related to monetary policy are always felt a long time after these statements are made and the actions taken. The vote in the committee was 7-3 to take these actions. It was the first time since November of 1992 that the committee had 3 dissenting votes on monetary policy. The 3 votes were from members concerned about inflationary pressures. So, what did the Fed just do?  

While planning for today's article I was watching the Dow drop 635 points, politicians pointing the finger left and right - literally - the mainstream media attributing the fall in stocks to overseas government debt concerns and the Tea Party, while conservative talking heads where saying the uncontrolled growth in spending over the past 2.5 years is the real problem. I, like many, couldn't help but feel a bit frustrated over stalemate and the hypocrisy. Then I reflected a bit closer to home. I like Facebook for a number of reasons, but one in particular is that it allows me to interact with those who don't share my political views. While these interactions have caused my blood pressure to escalate a bit higher than it should - it has provided an unvarnished view into what makes the left tick. Recently, I have had the opportunity to debate one on one with those who claim to be socialists within our borders. These interactions have shown me the level of socialist principles that have been mainstreamed into the population which contribute to the gulf in how we see the world. Many of those I've interacted with don't believe in organized religion, and they feel those that do "believe" are hypocrites and uncaring towards other's needs. Theses self-styled socialists think it is perfectly fine to take money from others to 'create a happy and more loving and just society'. And, the only way they see their ideal society being attained is through coerced wealth distribution carried out through the government. There is no appreciation that the programs they support to create their ideal society tend to entrap those unfortunate people they are trying to help in a cycle of dependency that is very difficult to break. There is a distinct distain for those who have built wealth, those who own businesses (the bosses) and, for those who believe that our society creates opportunity for anyone to succeed. In fact, there is a core belief, in the socialist ranks, that our society purposely denies opportunity for people to succeed. And, for those who have succeeded - they have somehow succeeded through means which are less than honorable - or by "knowing someone". When you reflect on these attributes of socialism in the U.S. you start to see that there is a thriving support mechanism established for all of these beliefs. Mainstream media has lead the charge against openly discussing religion in public. We have a President who publically stated that wealth redistribution is a fundamental policy of his Administration and party. Unionized workforces across the country establish their legitimacy on separating and protecting the "labor force" from "management". And, the entertainment industry constantly forwards messages on all these fronts to an awaiting population - including individuals who make statements like, "We are not broke. This country is not broke. There is a ton of cash in this country", as Michael Moore did recently during the Wisconsin uprising in Madison, intimating that all "we" have to do is go and get it. We may be frustrated over the stalemate, and not fully comprehend why we can't move past what appears to be a very basic issue of fiscal management, but when you look at what has manifested itself within our borders we shouldn't have expected a different result. What is your insight into socialism in the United States? 

Well, it wasn't like we shouldn't have expected a downgrade in our country's debt rating. It was clearly signaled to all parties for some time - including the amount of debt reduction required to maintain our previous AAA rating. So, at least according to Standard & Poor's we are now a AA+ for the first time in over 100 years. And, how did Congress and the Administration react to their failure to avoid the downgrade? They did what they do best, point fingers and obscure the issue as much as possible. We won't rehash the S&P downgrade in detail here, you can read the entire press release, which is fairly straight forward. Essentially, S&P said the deal to reduce spending by $2.1 - $2.4 trillion over 10 years is not enough (S&P was looking for $4 trillion), and they are weary of the outcome from the about to be formed committee in Congress to figure out where these cuts come from. Boiling it down, it was not enough, and Congress and the Administration have no credible track record of making the tough decisions necessary to get a handle on our country's spending. The Democrat's talking points over the weekend didn't take ownership of the problem, instead they attempted to hoist the blame on the Tea Party. Is this the same Tea Party that the Democrats attempt to marginalize as being a small minority of right wing radicals? The same small minority, which they now claim has taken over the entire government? I guess the Democrats need to obscure their record as the party who controlled the Presidency, the Senate and the House and yet couldn't produce a budget for the United States of America for 2 years in a row. The Republicans, headed by John Boehner, characteristically blamed the Democrats and their out-of-control spending for the downgrade, while taking credit for shifting the debate from spending more to how much to cut. The issue with the Republican's position is that they knowingly agreed to a deal which was too small and that would lead to a downgrade - making them equally complicit in the "who to blame" game. And, just to prove that obscuring the facts is not something just left to Congress, the Administration's reaction to the downgrade was classic. First, the President took the high road (kinda) leaving for Camp David from the White House in the afternoon and not saying anything about the downgrade. However, the Treasury had an interesting response. While steering clear of an official press release on the matter, they posted a Blog on the Treasury web site titled, "Just the Facts: S&P's $2 Trillion Mistake", where they claim S&P made an error in their calculations which, if corrected, would materially change the rationale for the downgrade. In other words, S&P messed up and there really shouldn't be a downgrade! We'll have to wait and see if Fitch and Moody's make the same mistake in the coming weeks. If they do, the Treasury's attempt to obscure the obvious will look even more lame than it does today. The dynamics that allow this circus to continue in Washington need to be addressed. In our "representative" government factions on both sides of the political spectrum are dug in, while the vast majority of Americans are on the sidelines assuming that none of this will impact them - to any great extent. Which, is of course, wishful thinking at best; the downside to not fixing these issues will hurt everyone. How difficult can it be to get this message out to everyone: We need to cut spending by at least $4 trillion (and do it fast); balance the budget in the next few years to prevent this from happening again and again; and, reform taxes in this country to ensure everyone has skin in the game (along with their vote) - at the appropriate level. 

We like history. History can teach us lessons and inform us of the thought and intellect of generations past. Many times these lessons serve to guide us through tough times and help us make the right decisions. Today, we go back in history to the not-too-distant past, August 2, 2010. We will not be reflecting on the intellect of generations past, only words of those present today. Just over 1 year ago, on August 2, 2010, our Treasury Secretary, Timothy Geithner wrote an Op-Ed in the New York Times titled "Welcome to the Recovery". In this article Geithner wrote, "The economic rescue package that President Obama put in place was essential to turning the economy around. The combined effect of government actions taken over the past two years - the stimulus package, the stress tests and recapitalization of the banks, the restructuring of the American car industry and the many steps taken by the Federal Reserve - were extremely effective in stopping the free fall and restarting the economy." Flash forward to today, where unemployment is at 9.2%, the Dow dropped 500 more points yesterday giving up all the gains for the year, and our country is on the verge of having its credit rating dropped for the first time in over 100 years. However, we should focus on the positive and the lessons we can learn from the past year so we can avoid these same ills in the future. First, I believe that the Secretary really believed the Administration ushered in the recovery with their huge government intervention into the private sector. And, for a short time all that taxpayer money actually did stave off the inevitable. So, they should get some credit for pushing off the bad stuff until now (although if they had to do it over again - they might have wanted to take their medicine last year and clean up the scene for the election). But the lesson is that government cannot correct a down economy by spending wildly - it only elongates and deepens the pain. Second, whether you're in politics or not, whenever you write something for public consumption as a leader - always ask yourself, "If I totally miss the boat on this topic, can someone resurrect this piece and clearly demonstrate that I really don't know what I am doing?"  On the bright side, the Secretary has his Op-Ed already written (with some updating and minor revisions) for what we hope is the not-too-distant future.

With all the noise and theater over the debt and the debt ceiling of late coming to an end - at least until the rating agencies throw some more kindling on the fire - and the House on recess, news on the industry has dropped off considerably. In the silence we asked ourselves, "What is the CFPB up to?" With its launch on July 21, 2011 we expected to see the $500 million a year organization role onto the financial services regulatory scene and take over, much like a D-Day invasion. However, for the most part, the new agency has kept a very low profile in the first few weeks of its existence. The last press release by the agency was on July 26th, when the new leadership transition plan was announced. And, the "update" on the agency's web site on "Building the CFP - A Progress Report" was written by Elizabeth Warren on July 18, 2011 and titled, "A Strong Foundation". Reviewing Elizabeth Warren's schedule from June was somewhat interesting, although not very informative. I wonder who she had dinner with on June 6th (blacked out)? And, there was a page for consumers and those who work in the industry to Tell Us Your Story - good, bad, ugly or otherwise, concerning consumer financial products. However, this page is not a compliant page - there is a special page for Complaints. We would suggest the good folks at the CFPB spend a little time editing the compliant page since it appears that you can only place a complaint regarding a credit card issue - although other options exist below it.  If you scroll down below the "Building the CFP - A Progress Report" you will find 14 comments posted by individual citizens responding to the grand opening of the CFPB. First, we thought that only 14 comments were not all that much for an agency that received so much attention for past year. Then we decided to read through them. Of the 14, 12 are pro-CFPB and yes, 2 are not. From a review of all comments, it would appear that what is needed more than consumer protection and additional regulation are English 101 and Grammar classes, with a sprinkle of a few lessons on punctuation. Maybe the CFPB ought to send these writing examples to the Department of Education for further examination and new program development. Today, August 4th, marks 2 weeks since the $500,000,000 ($500 million) a year agency opened its doors for business. That's roughly $9.6 million a week, or $19.2 million so far. Despite our best efforts, we were hard pressed to see what the CFPB has been up to in the last two weeks. However, that may not be so bad. It may be that the CFPB has just joined the rest of the government agencies in doing what they do best - consume tax dollars.

Moody's and Fitch, 2 of the 3 credit rating agencies who have threatened to downgrade the U.S. sovereign credit rating, gave a polite nod to the debt ceiling increase passed by Congress and signed into law by the President yesterday, and then told our leaders to get serious, or else. They reminded Congress and the Administration that this is at least a two-step dance; a) don't default, and b) regain control over the nation's spending. Without a credible plan to address both default and spending, the Aaa rating we enjoy as a country is still in peril. When it comes to the spending side of the equation, "the other" rating agency Standard & Poors (S&P) signaled, before it was brow beaten by Congress, that a spending cut of at least $4 trillion was needed to demonstrate that the government was serious about managing spending. The deal signed by the President yesterday cuts spending by $2.1 trillion. S&P has yet to comment on whether they view the $2.1 trillion deal as a serious step in managing the size of government spending, when compared to the value our economy generates each year. However, most who watch this issue closely say that S&P has little choice but to downgrade the U.S. rating - if they want to maintain the appearance of independence and credibility - due to the relatively small cuts made to government spending in the deal signed by the President. Many already say the markets have taken into consideration a downgrade in the U.S. rating, and the downside, in terms of stocks and bonds would be minimal. However, there is no doubt that world markets and indeed the major holders of U.S. debt would take a dim outlook on seeing their investment quality diminish before their eyes. Russia, ranked 9th in terms of the most U.S. debt held by foreign governments, weighed into the conversation in comments made by their Prime Minister Vladimir Putin, "They (U.S.) are living beyond their means and shifting a part of the weight of their problems to the world economy." "They (U.S.) are living like parasites off the global economy and their monopoly of the dollar." Putin's comments were made to a pro-Kremlin group of youths at a lakeside summer camp north of Moscow. Meanwhile, the President's lead negotiator on the debt ceiling and deficit reduction effort, our Vice President, is fending off reports that he called Tea Party members "terrorists". There is a very good Op-Ed in the Boston Globe published this morning that you should read, regardless of your political view(s), which addresses the seemingly uncontrollable urge of one political party to equate its opposition as an enemy of the state.

If $1,000 dropped into the Treasury's coffers every time a member of Congress, or the President, said, "We are not going to kick the can down the road on the debt ceiling and deficit debate", we may be close to a balanced budget by now. However, kicking the can down the road appears to be just what our leaders in Washington have done. With an "immediate down payment", in other words a small spending cut of roughly $900 billion occurring in the not too distant future, the rest of the $1.5 trillion in reductions to spending are left to a bi-partisan commission, which is due to provide recommendations on November 23, 2011, which will then be voted on by Congress no later than December 23, 2011. All of this compromise was made to extend the borrowing ceiling for the government for the longest period it has ever been extended - until after the 2012 elections. The shift over the past 48 hours in the discourse on this topic has been clear. On the left, there have been statements that call the whole incident a "manufactured crisis" by the right, and more importantly the Tea Party. However, these statements ignore an important distinction when it came to raising the debt ceiling this time. Yes, it has been done before. However, the total sum of our country's debt during those previous increases never actually equaled or exceeded the total dollar value produced by our economy in a single year, creating the real likelihood we may not be able to pay for the spending. Couple the growth in debt with deficit spending which skyrocketed in the last 2 years, from a deficit of $450 billion in 2008, to $1.3 trillion in 2010, and there is little to the notion that the right somehow "manufactured" the crisis. On the right, there is a lot of back slapping and glad handing over the fact that they changed the conversation from out of control spending to cutting spending and the debt. While it is true we have turned that corner, we have done so with such a small amount of promised cuts to spending, spread over such a long period of time, that the impact is a rounding error at best. While the bi-partisan committee must come up with recommendations to spending cuts, the term in which they must be attained is over 10 years. Most, if not all, of the politicians who will hopefully make this deal today with a final vote in the Senate, will not be around in office to see the reductions take place - if they ever do take place. If this is not "kicking the can down the road", what is?

Misdirection: Actions and Results Speak Louder than Words
We had hoped to be writing this morning about how both parties in Congress had found a way to raise our debt ceiling while taking the proper steps to manage our massive increase in government spending. However, that hope was misplaced. In reflecting on the difficulties to "get a deal done" concerning the debt ceiling matter we tripped across a common dis-functional theme in politics and indeed our society as a whole. Misdirection. By misdirection we mean that we say one thing concerning a goal or an objective, which can't possibly be objected to by the majority of those listening, then we take actions to pursue that goal or objective that actually run counter to the goal or objective we've stated we want to accomplish. And, in some cases we even tout that those actions are promoting the attainment of the goal - even though there is no real evidence to support that assertion. Let's look at some real life examples. Take for example, equal rights. Let's stick to speaking generically about equal rights of any group deemed as repressed by society in general and not any specific group. Those who want equal rights for their group work hard at making sure their group is different from everyone else. Perpetuating the label of different seems to run counter to creating the opportunity for equality. Once they've achieved that plateau, the vast majority of equal rights champions work hard at garnering special privileges for their group. These privileges often make their group is dependent upon additional support to be equal - which is not equality. They also work to curb how others speak or refer to their group, often perpetuating negative stereotypes of their own group. Let's try something from banking, like "safety and soundness". Politicians have set aside an entire portion of government to promote "safety and soundness" in banking. This sounds good and right, doesn't it? We should be promoting safe and sound practices, which ensure the viability of the banking system - that's logical and sound thinking. Yet these same politicians generate regulations and law which demand that banks lend to people who can't afford the home loan they just applied for in the name of "affordable housing". And, they tell banks that they can't "redline" - and that they need to make loans in areas where the potential for default is high. If banks make these high risk loans, they get a good grade on their Community Reinvestment Act (CRA) exams. So, are they really promoting safety and soundness? Or, are they just telling us they are - so they can hide behind that phrase? Let's discuss the current debt crisis. For years, both parties have been guilty of using our money to bribe us - and in doing so, have bloated the size of government to obscene levels. They do this in the form of tax cuts (giving us back a small portion of the money they took from us), more programs which appear to help but in the end only accomplish a goal of generating more people to help, and dozens of other examples. So, it is misdirection at its best for either party to tell us they have seen the light on managing the size of government. If you listen to our President of late, you would believe - based on his words - that he is now "...looking for the biggest deal (deficit cuts) he can get" - even bigger than the Republicans want. Really? This is from the same guy that took the debt from $9 trillion to $14 trillion in 2.5 years. And, from the Administration that passed a $1 trillion government takeover of healthcare - while cutting $500 billion from Medicare. If you just listen to the rhetoric coming from the Democrats you would believe that the Republicans are cutting Medicare, right? We can go on for quite some time with examples from both sides of the political spectrum. However, when two people can listen to the same speech and walk away with totally different meanings from the same words - maybe one is watching the actions and results of those speaking, and the other may be placing too much reliance on just the words. 

As we reported yesterday, President Obama nominated Richard Cordray as the Director for the Consumer Financial Protection Bureau (CFPB). That nomination kicked off an expected round of press management and public opinion management for Republicans and Democrats alike. Without delay the May 5th letter written by 44 Senators to President Obama outlining the conditions for an approval of his nominee for the CFPB was resurrected and replayed by the media. Most likely this was prompted by Senator Richard Shelby's (R-AL), one of the 44 senators to sign the letter, statement "Until President Obama addresses our concerns by supporting a few reasonable structural changes, we will not confirm anyone to lead it.... No accountability, no confirmation." Elizabeth Warren, now free of the burden to make nice with both parties, squared off on Republicans accusing them of attempting to re-legislate the Financial Reform Act (Dodd-Frank) which passed Congress over a year ago. Also, there is a left leaning but generally fair exchange in a PBS NewsHour segment where U. S. Chamber of Commerce representative David Hirschmann squared off with Jeff Madrick from the left leaning Roosevelt Institute on the debate over the CFPB. If you take the time to view this 13 minute video segment - and you are familiar with the current regulatory burden banks face related to consumer protection - you will be entertained by Madrick's position that the financial marketplace is akin to the wild west and consumers are being abused daily. Anyway, to us it is simply - as we promised - going to be good entertainment. We believe that no one will argue that there should not be reasonable consumer protections in the financial marketplace - this is really not the issue. The issues that fails to garner mainstream media attention in this debate are; a) the enormous power that has been vested in the Director role - one person with the ability to vote up or down on whether financial products are available or not to the public, with virtually no oversight from any other entity, b) an agency which does not have to go to Congress for its budget - with the power to tell the Federal Reserve how much it needs each year, with no checks and balances, and c) the desire of the current administration to place anti-business and indeed anti-banking leadership into this new agency which they term as "..one of their greatest achievements". There have been reasonable "fixes" proposed to what some see at the unchecked powers of the agency; A bi-partisan committee versus one single Director with all the power, and, Congressional appropriations of the budget for the agency making it accountable to Congress and therefore the people. Time will tell which side of the argument manages the narrative in the press and wins this debate.

Federal Reserve's Balance Sheet: Fun with Numbers 
The Federal Reserve's balance sheet grew from $870 billion ($870,000,000,000) in December of 2007 to $2.88 trillion ($2,880,000,000,000) yesterday. The difference represents $909 billion in mortgage backed securities (i.e. toxic loans) and the remainder is the amount of debt that the United States has generated that supposedly no one wants which has been purchased by the Fed under their quantitative easing programs (QE1, QE2). To understate the current situation, this increase is large. On a percentage basis it is a 286,999,999,999,900% increase in the Federal Reserve's balance sheet. To attempt to put the size of the Fed's balance sheet into perspective, the defense budget of the United States in 2010 was $680 billion. Defense spending in 2012 is projected to be between $1.0 trillion and $1.4 trillion. So what does bloated balance sheet at the Fed mean to you individually? Well, there are approximately 307 million people in the United States. That would equate to an individual share in the toxic loans and U.S. debt of about $9,400 for every man, woman, and child in the country. This is about $37,400 per family for a family of four. It is estimated that it could take 5 years to return the Fed's balance sheet back to pre-crisis levels. Oh, the Fed is considering another round of stimulus - only if we need it.

My view this morning has caused me to reflect on recent and past points in history where our government used its power to facilitate and foster growth - rather than attempting to become the engine of growth itself. The view I have is from the porch (purportedly the largest in the world at 660 feet) of the Grand Hotel on Mackinac Island, Michigan. The Hotel is a jewel of American history and a great example of what American entrepreneurship can accomplish. Built between 1886 and 1887 the hotel was the creation of the Michigan Central Railroad, Grand Rapids and Indiana Railroad, and the Detroit and Cleveland Steamship Navigation Company which formed the Mackinac Island Hotel Company. Since its opening the Hotel has served many guests, famous and otherwise, and has rightly established its place as one of a few examples of a golden era which has past. The Hotel's railroad connection started me thinking about how much government intervention was needed to create the first transcontinental railroad across our country which occurred around the same time as the Grand Hotel came into existence. As it turns out, there was much government intervention in the building of the two railroads which connected the Central Pacific Railroad (west) with the Union Pacific Railroad (east) at Promontory Summit, Utah on May 10, 1869, some 18 years before the doors of the Grand Hotel opened. However, the government intervention, or help, in building the railway which connected the east and west coasts of our country was provided in a way which was reasonable in terms of its exercise of power, and measured, allowing private enterprise to take the risks involved in a venture that looked promising, but had no guarantee of success. While there are many twists and turns in the story related to how the railroad was built, the central portion of the story of government help is related to the Pacific Railroad Act, signed into law by President Lincoln (I walked past his bust in the hallway at the Grand Hotel) on July 1, 1862. The Act set the two privately held railroads - Central Pacific and Union Pacific building towards each other. The government made payments to the railroads in the form of bonds backed by the government which the companies could sell to land owners along the path of the railroad. They were paid a set amount for each mile of track laid based upon the difficulty of the terrain. For example, they were paid $16,000 for easy terrain and up to $48,000 per mile for over mountain routes. Backing the value of the bonds was the other form of government help - land grants of federal land to build the railroad and a right-of-way equal to 10 square miles of track for every mile laid. To avoid the railroads from gaining a monopoly on valuable land, the plots of land granted were done so in a checkerboard pattern. In the end, as we all know, the railroads were a success and those who initially invested in them became very wealthy. As for the government, they were repaid by the railroad companies with principal and interest. As for the federal land grants, much of the land "granted" was of not much value and was called by many as "virtually worthless", the railroads were able to sell the land in the Sacramento Valley and Nebraska at what was termed as a "good price". By enabling private industry through land grants and the backing of government bonds - which the companies had to sell to raise funds to build the railroads - a golden era of prosperity was born in our country. As I sit and watch the nine large American flags on the porch of the Grand Hotel gently blow in the breeze off of Lake Huron, I wonder if our government can find the restraint once again to be the facilitator of private enterprise and usher in the next era of prosperity.