Americanly Yours

How exactly did we get to the point where government owned banks started charging credit card holders fees for paying off their balances every month?

The government passed laws like the Community Reinvestment Act which essentially mandated banks to loan to people who would not have been able to obtain loans otherwise.  Then, the government and the Federal Reserve created money out of thin air and lent it to banks at absurdly low rates.  Flush with new and cheap money, these banks massively increased their lending to “sub-prime” borrowers (begin bubble).  With the money supply growing at unprecedented rates in the 1990’s and this decade, there was always enough money for banks to make loans.  Borrowers were able to take out second mortgages at very low rates.  Home builders rapidly built houses to meet soaring (bubble-induced) demand.

As with all bubbles, this one burst, leaving home builders unable to sell newly built houses and borrowers unable to meet their obligations.  Banks had sold off the rights to their lender’s payments so they would have more money to make new loans.  This left the banks in the same boat as homeowners who could not make their payments.  But, while homeowners and home builders had to file for bankruptcy and sell off their assets to pay their debts, the banks used their lobbyists, fear, and their ownership of the Federal Reserve to convince our government to bal them out.

The government and the Federal Reserve then printed up a bunch of money–they simply created it out of thin air–and gave it to the banks in exchange for ownership.

This happened on October 3rd, 2008.  I can understand the government’s perverse rationale that led it to bail out these banks.  What I can not understand is why, over a year later, the government continues to own large stakes in these banks.

The government has now taken to regulating the salaries of banking officials, as well as the actions and practices of these banks.

So, it comes as no surprise to the observant that the government would use its power and control to create perverse incentives.

Bank of America and Citigroup–two firms now under the ownership of the federal government have begun implementing new fees.  These fees are not on late payments, gong over one’s credit limit, or cash advances.  Instead, these government owned banks have announced fees for customers who regularly pay off their balances.  Customers who leave monthly balances on their cards will not be charged the fees.

A fee is similar to a tax (especially if t is levied by a government owned entity).  Both taxes and fees use pricing to create incentives to change behavior.

Because Bank of America and Citigroup are owned by the government, a fee on those who pay off their balances regularly can be viewed as a tax on them.  Because those who leave monthly balances on their cards are exempt from these fees, this can be viewed as a subsidy for those who leave balances.

Our government is creating perverse and dangerous incentives: they are incentivizing debt and discouraging good and proper financial habits.

But, you cant hardly be surprised by this.  After all:  our perverse government’s perverse actions do tend to lead to perverse incentives.

Americanly Yours,

Phred Barnet

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For the first time in almost 35 years, there will be no cost of living increase in Social Security payments.  In the predictable “something must be done about this [so called] problem” mentality of this administration, President Obama has proposed sending $250 checks to over 50 million seniors to help them cope with their financial woes.

The problem here is that there is a very good and simple reason why there is not going to be an increase in Social Security payments: prices have dropped by 2.1% since the fall of 2008, meaning that the money that seniors already get from Social Security actually buys more goods and services than it did last year.  On top of this, the Social Security Administration has already given seniors a large increase in their payments this year: in January, seniors received a 5.8% boost in their payments, the largest increase since 1982.

Once again, President Obama is using misguided “logic” to support his own political goals.  Social Security payments are indexed to price inflation, however, they are not allowed to be decreased, meaning that a decrease in prices actually makes seniors much better off.

I understand that many seniors are suffering in this recession.  Many have lost a great deal of their savings due to the collapse in stock prices.  However, Congress decided over three decades ago that Social Security payments would be linked to the cost of living.  Besides the obvious reason of guaranteeing seniors a livable income, Congress likely had another reason for guaranteeing the benefits: they wanted to take the decision out of the hands of the political process.  Right or wrong, it will be very difficult for members of Congress to vote against the $250 payment for seniors.  For one, seniors are a vulnerable group, many of whom are living only on their fixed Social Security payments.  Seniors also vote–a lot.  As a group, they historically have the highest rates of voter turnout.

I firmly believe that this bill should be voted down.  For one, President Obama’s proposal to send checks to seniors  is addressing a problem that doesnt actually exist: seniors can buy more for their money than they could a year ago.  Additionally, these payments will cost roughly $13,000,000,000 [$13 billion] in money that the government does not have.  The money being spent on this non-existent problem will have to be expropriated from hard working citizens or printed out of thin air (devaluing the savings and earnings of anyone who does not receive a payment).

This “something must be done” mentality is flat out wrong.  Many supporters of the bailouts, stimulus, and other interventionist policies defend them not on moral or economic grounds, but rather defend them by saying that “at least they are trying something.”  This mentality has brought this once great Nation to the brink of bankruptcy and has brought government regulation into nearly every single aspect of daily life.  We can only hope that enough members of Congress will do the right thing and oppose these payments.

Americanly Yours,

Phred Barnet

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We are making good progress towards getting this bill more support.  We have to keep up the effort!  The Senate is still preoccupied with the health care debate, but a vote is expected on that issue soon, meaning that there will be more time for Senators to focus on passing S 604.

In case you didnt notice, I put up an entire section devoted to this bill.  You can find it right under the Americanly Yours logo, or by clicking here.

If you use Facebook or GMail, please consider adopting the following messages as your “status” daily.  Even if you are not willing to make these messages your status, please consider calling the Senators.  This is very important!

Status for Monday, October 12:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Mary Landrieu (LA) (202) 224-5824. Republican: Michael Enzi (WY) (202) 224-3424. It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Status for Tuesday, October 13:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Kristen Gillibrand (NY) (202) 224-4451. Republican: George LeMieux (FL) (202) 224-3041. It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Status for Wednesday, October 14:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Tim Johnson (SD) (202) 224-5842. Republican: Richard Lugar (IN) (202) 224-4814. It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Status for Thursday, October 15:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Tom Udall (NM) (202) 224-6621. Republican: Olympia Snowe (ME) (202) 224-5344 . It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Status for Friday, October 16:

S. 604 (The Audit the FED Bill) Now has the support of 31 Senators! Victory is within reach. Lets target 1 Democrat and 1 Republican today and bombard them with calls to get their support. Democrat: Jay Rockefeller (WV) (202) 224-6472 . Republican: Susan Collins (ME) (202) 224-2523. It literally takes less than 2 minutes to call! PLEASE REPOST!!!

Americanly Yours,

Phred Barnet

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The War in Afghanistan will soon have been going on for 8 years with absolutely no end in sight.

Are we losing?  Maybe, maybe not.  But, it is clear that we are not winning.

A “surge” like President Bush’s successful strategy for turning around the Iraq War is unlikely to work in Afghanistan.

This War has cost hundreds of billions of dollars in Treasure and, more importantly, hundreds of honorable American lives.

I supported this War for a long time–pretty much everyone did at some point.  In November 2001, shortly after the War started, only 9% of Americans thought the War was a mistake.

But, changing situations create the need for changes in outlook, and often changes in policy.

Whether or not the War was a mistake, a majority of Americans now want our troops to leave Afghanistan.

We have not succeeded in dismantling al-Qaeda.  We have not captured Osama bin-Laden or many of the other high value targets.

The Soviet Empire’s premature end was due in part to its war in Afghanistan.  We should not allow history to repeat itself and bring an end to the mighty American Empire as well.

This Nation is hemmorhaging money, the economy is dismal.  It is time to stop spending so much of our National fortune on this War.  Our cost for this War will be paid back  over the next 3o years to China and others who have loaned us the money to fight.

Afghanistan’s government is crumbling and it now appears that Hamid Karzai, Afghanistan’s American backed Prime Minister may have engaged in ballot-stuffing and other measures of voter fraud to keep himself in power.  These actions are preciously the same that American officials have criticized Iran for taking.  By standing behind a government like this, we are implicitly voicing our approval of these actions.

This war has spilled over into Pakistan and has greatly destabilized a nation with nuclear weapons–threatening the security of the entire world in the process.

The anti-war left has recently been strangely silent over the wars in Afghanistan and Iraq.  My assumption is that they have not wanted to create political problems for a President that they largely supported while he is trying to push through health care and environmental legislation also largely supported by this group.  With the health care and cap and trade bills headed for near-certain failure or at a least a major watering down, I suspect that the anti-war left will begin to be more vocal in its opposition to the War in Afghanistan again soon.

New polls show that the majority of Americans now oppose the War in Afghanistan.  President Obama’s approval ratings have now dropped to the mid-40-low 50’s range.  You can be certain that President Obama does not intend to sacrifice his popularity over a war that was started on President Bush’s watch.

In the coming months, President Obama soon announce his decisions on what to do about the War in Afghanistan.  Many policy analysts believe that the President will announce a large increase in the number of troops for Afghanistan.  This is exactly the wrong strategy.  President Obama should begin a massive withdrawal of American troops from Afghanistan.  Im not saying that we shouldnt continue to hunt bin-Laden–I would favor leaving behind an extremely small and elite force to hunt terrorists and bring them to justice.  However, we should stop engaging in “nation building,” stop propping up Karzai’s corrput government, and stop fighting this War.  If other Nations wish to continue fighting this War without our aid, let them do so, but the United States government should cease spending the lives and the wealth of Americans on this War.

We can still leave Afghanistan honorably; it is time to do the right thing and bring our brave and heroic men and women home from Afghanistan.

Americanly Yours,

Phred Barnet

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President Obama announced today that he will nominate Ben Bernanke to serve as Chairman of the Federal Reserve for a second term.  This is a huge mistake.

Ben Bernanke started as Chairman of the Federal Reserve on February 1, 2006–about two years before the economic crisis fully blossomed.  While his policies are not responsible for the onset of the crisis, they have done little to help the situation.  Chairman Bernanke has consistently been wrong about his assessments of the economy since he began his tenure:

I think that nominating Ben Bernanke for a second term is a careless move on President Obama’s part.  For one, the man ran on a platform of “change.”  He hit the Republicans and President Bush particulary hard on two main issues–the administrations handling of the war(s) and the administration’s handling on the economy.

And yet, in his first year of office, President Obama has continued to allow President Bush’s Secretary of Defense to serve, as well as allowing President Bush’s choice for Federal Reserve Chairman to stay on.  Selecting a new Federal Reserve Chairman would have been a great opportunity for the President to reinforce his message of “change.”  He could have dumped Chairman Bernanke and blamed President Bush for the economic crisis in the process.  By renominating Chairman Bernanke, President Obama has taken ownership of the economy, and tacitly accepted President Bush’s decisions with regard to the crisis.

This will be one of the moments that will come back and bite President Obama in the 2012 Presidential elections.

Americanly Yours,

Phred Barnet

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