Except for that little dust up starting in 1938, the last time something in Austria fell, it started a World War. Fitch Ratings joined S&P and Moody’s in downgrading Hungary’s sovereign debt to junk level. Hungary rejected all bids at an auction of 12-month Treasury bills worth 40 billion forint ($186 million) after getting bids for only 22.8 billion forint. However, the concern is not for Hungary, but for neighboring Austria whose banks have a $226 billion exposure to the debt of former Soviet bloc countries. If Austrian banks fail, then… So it begins.
Whirlpool misses its analyst estimated (made up) Q3 earning per share goal of $2.68 per share instead checking in at $2.35 despite sales rising 2% to $4.6 billion. Because of this, Whirlpool CEO Jeff Fettig announced the company would lay off 5,000 workers in North America and Europe. End of year earnings estimates were also revised downward to $4.75 to $5.25.
Whirlpool is only going to make between $363 million – $401.1 million in profit for 2011, so naturally, American workers will have to suffer.
I appear to have misplaced the press release where Whirlpool’s executive team taking any pay cuts. Whirlpool’s five top paid executives make a cumulative $28.6 million a year. But I’m sure it will turn up somewhere…..
Further reading into the President’s new and improved HARP program to help troubled, underwater homeowners refinance into lower interest rate mortgages that we touched on yesterday reveals even more gooder goodness for the banks and further proof that this is a bank bailout and not a stimulus.
The first part, and this is a biggie, is that those new mortgages with their shiny new interest rates also magically convert into recourse mortgages instead of non-recourse. That is, with a traditional mortgage today, if you default on the mortgage and the bank forecloses on your property, any deficiency between the auction price of the home and the remaining balance of the loan is eaten by the bank.
By converting these mortgages (which are already vastly underwater mind you) into recourse loans, that balance will now follow you around for all eternity or until bankruptcy court. Anyone who agrees to one of Obama’s new mortgages instead of going into foreclosure and living in the house rent free for 18 months needs to have their head examined. Anyone who does this needs to realize that they have just signed their entire life away to the bank.
The next part is no less serious, but is more of a direct gift to the banks and only affects you as a taxpayer rather than a homeowner.
FHFA moved to protect lenders from having to buy back loans if underwriting problems are later found. “Of all the barriers, this may be the most significant,” said Gene Sperling, director of the White House National Economic Council.
Basically, the banks can keep right on going with their sloppy and fraudulent mortgage writing procedures and not suffer any consequences from their actions. When the mortgage fails, the bank doesn’t suffer, we the taxpayers do.
Thankfully, so few people will qualify for these new regulations and hopefully those who do will be told by you, dear reader, that doing this is such a terrible idea that the overall impact of Obama’s new mortgage plan on the taxpayers will be minimal.
Obama reveals a series of rule changes to help underwater homeowners.
WASHINGTON — Seeking to circumvent congressional opposition, President Barack Obama is promoting a series of executive branch steps aimed at jumpstarting the economy this week, beginning with new rules to make it easier for homeowners to refinance their mortgages.
The White House said changes to the two-year-old Home Affordable Refinance Program will help homeowners with little or no equity in their houses refinance by cutting the cost of doing so and removing caps to give deeply underwater borrowers access to the program. The new rules apply to homeowners with federally guaranteed mortgages who are current on their payments.
This is a terrible terrible idea. It’s being promoted as a stimulus when it is really another bank bailout at the expense of tax payers (on the front end) and homeowners (on the back end being conned into paying more for a property that is worth less) Refinancing an overpriced house at a lower rate is still paying too much. Many of these houses are so underwater that they will never recover the current value of their mortgages while the mortgage is still being paid on.
Tax Discussion – If a person whose income consists only of wages makes $100,000, she will pay $7,650 in payroll taxes, plus $21,617 in income tax – a total tax burden of 30%. A man with the same income in qualified dividends pays zero.
The people of Occupy Wall Street aren’t against the rich for being rich. They are against the rich for how they got rich. Most of the rich are as rich as they are today because they fired as many Americans as possible and moved the jobs over seas. I want the rich to bring back jobs to the U.S. so people can WORK and EARN a fair living.
Try and buy an American made cell phone. You can’t do it.
Try and buy American made clothes in anything other than a boutique store. You (mostly) can’t do it.
Try and buy an American made T.V., you can’t do it. There is nearly ZERO flat screen production in the U.S.
Try and buy an American made Lawn Mower: Briggs and Stratton, Tecumseh moved all of their engine manufacturing to China and India.
NONE of this stuff is being manufactured in the U.S. anymore…. but the price of lawnmowers hadn’t gone down. The price of TVs hasn’t gone down, the price of clothing hasn’t gone down…. so all that money saved by the companies by moving the jobs to China has gone to executive pockets while the wages of manufacturing laborers has fallen. In 2001, the 27″ CRT television I bought cost about $300, which is right around the same price for a 27″ basic LCD TV today. In those 10 years, Sony has closed the TV manufacturing plant in nearby New Stanton, PA and moved production overseas putting 650 people out of work and helping to continue to depress wages in the area.
Wages for the average American male peaked in 1973. The median inflation-adjusted household income hasn’t changed in over 30 years. The top 1 percent of U.S. households gobble up about a quarter of all income. The first person to suggest that this is due to women entering the work force gets poked with a sharp stick that was Made in China.
I see statements by people against Occupy Wall Street saying that without capitalism we wouldn’t have Bill Gates and Steve Jobs. (well… had). And without those two, we wouldn’t have all these good jobs around. This is a funny argument because the Occupiers aren’t against capitalism.
The reality is though, that these two men, in concordance with the rest of the I.T. industry have both created and destroyed jobs here in the U.S.. Yes there are far more computer jobs today than there were in 1980, however there are also far fewer computer manufacturing jobs. And this is where the anti-Occupy crowd’s argument falls down.
The Occupiers are looking for a fair shot at the middle class American dream. But companies like Microsoft, Apple, Dell, and HP have sent all of the manufacturing jobs overseas. The capitalist who the Occupiers should be looking to is more someone like Henry Ford.
Not everyone can be Doctors, Lawyers, or Computer Engineers. Those who aren’t gifted with those thinking abilities should still be able to earn a living from their labors… for that we need manufacturing jobs here. The result will be the re-birth of the lower and middle class WITHOUT the need for government assistance to just eat.
There are three things important to Capitalism: Capital, Jobs, and Consumers. The 1% has attempted to keep more capital for themselves by eliminating jobs in this country. They have off shored and outsourced every last bit of labor they can. In their shortsighted quest to inhale even more money, they have forgotten that people with jobs are also consumers, so eventually, this policy will come back to bite them in the ass.
Wanting to be part of the middle class with a good job and stable home is not some Marxist plot. The rich have tried to erase the middle class for their own gain. OWS is a response to that.
Republican “Jobs Bill”: Lift The Ban On Dwarf Tossing
In a move that will increase employment by at least three, a Republican in Florida is proposing lifting the ban on dwarf tossing
Representative Ritch Workman, a Melbourne Republican, has introduced a bill to undo a ban on “dwarf-tossing” as part of what he says is his mission to repeal overreaching and outdated laws from Florida’s books. Though the dwarf-tossing measure is not a “jobs bill,” he said, it may put a few people to work in a state where unemployment is 1.6 percentage points above the national average. Dwarf-tossing, a competition in which bar patrons see how far they can throw little people in protective gear, was banned in Florida in 1989 after opponents complained that it was dangerous and dehumanizing.
Some readers out there might know my love for rail travel and my feeling that we a grossly under served in the U.S.. Contrary to frequent accusations that I’m some sort of Marxist, I do not feel that passenger rail would best be served by a government takeover and subsidy. So here is my outline for passenger rail in the US.
Passenger Rail under a Drewbert administration:
1. Ability to maintain speeds above 100mph on trips over 30 miles.
2. Ability to maintain speeds above 130mph on trips over 60 miles.
3. Ability to maintain speeds above 160mph on trips over 120 miles terrain permitting.
4. All electric motive power.
5. Utilize a hub and spoke system.
6. Speed limits set at a federal level rather than local (this addresses a problem demonstrated with Amtrak’s Acela were local townships set absurdly low rail speed limits)
The basic structure would be that the railroad is operated privately, but the rail infrastructure for passenger service is federalized. New lines would be built for the Federal government by the existing rail operators. All passenger lines would be electrified.
Since the federal government would own and maintain the rails, a fuel tax would be levied to cover maintenance and expansion costs. The tax would be indexed to inflation and be structured in such a way that the tax cost per mile would be lower for electric locomotives. The exception to this would be the freight yards which would continue under existing ownership/operation/maintenance structure. Passenger stations would be owned and operated by state, county, or local governments and funded by a fee-per-use system similar to the gates at airports. Conrail would be re-introduced as the entity that owns, maintains, and runs traffic control on the lines.
Passenger trains would be owned and operated by the existing freight lines. In order to spur passenger train offerings, all passenger trains would be fuel tax exempt. As an incentive to offer the most reliable, fastest, and safest service possible, a gradually increasing standard of service would be established. Passenger trains that met that standard of service would qualify the freight operator for a fuel tax reduction on their freight operations. However, at no point can the tax reduction exceed 60% of the fuel tax paid. The credit would be structured in such a way that it the most effective way for the operator to get the largest rebate would be to operate frequent trips to minimize the impact of a single late arrival.
Since there is a need for more than just intercity travel, the tax rebate would be broken into 3 segments, each worth 20% of total fuel tax paid. The trip lengths specified in the requirements section would be the bases for each rebate bracket and could be earned independently of each other. Therefore, if a freight operator decides it is not in it’s best financial interest to offer the highest speed intercity travel (which might be the case the a company like the Union Pacific which operates in a lot of mountainous terrain) they could still qualify for the full rebate from each of the other two segments.
Amtrak would continue to operate during the transition phase, but would eventually be privatized completely or broken up and sold off to the freight railroads.
Some further points:
- One of the arguments against privately run passenger rail is the claim that it nearly bankrupted the railroads in the 1960s. They weren’t nearly bankrupted. They were bankrupted. However, not because of passenger rail specifically, but because of price regulation generally and an inability to innovate their transportation structure specifically. Price controls weren’t removed until the late ’70s (by Jimmy Carter if I recall correctly) and by then it was far too late. The FRA didn’t allow intermodel for a long time after the concept was introduced.
- The government takeover of the existing lines would be a government purchase, funded by the new fuel tax, and it would relieve the companies of a liability on their books. Additionally, the railroads would suddenly gain access to areas of the country where they do not operate.
- The freight railroads of today are some of the most cost efficient companies on the planet.
- The freight railroads of the 60’s were too fractured. Due to multiple companies servicing a particular area, there was far too much overlap capacity the led to waste. The consolidation into Conrail eventually took care of that overlap and within 10 years Conrail was turning a profit again.
- Shippers would now be able to choose their carrier instead of only being serviced by whoever owns the “last mile” line today.
The net result would be five new multi-billion dollar companies competing for your traveling needs with little to no subsidy from the government with a heavy incentive on energy efficiency and clean energy.