So, the government is running around, throwing a half-trillion dollars in a now-necessary bailout of the whole financial system. And to think, it started with mortgages to people who shouldn't have asked for them and certainly shouldn't have been granted them.
For those who don't have a stake in the stock market, people too poor, they think, to have to worry about what goes on in the financial markets, think again. You do have to worry and worry a lot.
I ran into New Haven Chief Administrative Officer Rob Smuts last night at what was supposed to be a city dog and pony show but turned into an information session for city officials.
In answer to a question, he said the city won't directly be hurt by the financial crisis. The sale of bonds to do some necessary work may be delayed, but that won't hurt much in the long run.
The real danger to the city, he said, in the possibility that the state may be hurt and hurt badly by a prolonged Wall Street crisis. How so? Well, he said, think about how many people who used to work at Lehman Brothers live in Connecticut. Think of the taxes they pay on their incomes, on their personal property. Think of the state's investments, billions of dollars.
If the state takes in appreciably less money, the cities get appreciably less money for education, payments in lieu of taxes, public assistance and the rest. If you are public assistance, Medicaid, or other programs, the state kicks in a lot of money.
The city laid off 34 people. More may have to go if the city's income from the state is adversely affected, he said. Something to think about whether you have money in the market or all your money is tied up in cash.
People who sell bank stocks short were compared to looters. I compare them to ghouls. These are people who try to profit from someone else's misfortune. You know, like the tramps and thieves who sold mortgages to people whom they knew couldn't pay them back, then sold them to gullible bankers and money managers, who packaged the loans and sold them to investors.
Selling short is making a bet to sell a stock at a specific price on a certain date. You are betting that the stock will drop in value before that date. If the stock is worth less, then you buy the stock for the lower price and sell it at the agreed price and make a profit on the difference.
The thing is, you don't have to buy the stock until the agreed time, so you never own the stock and never have to pay anything until the sale.
Short-sellers have been blamed, and rightfully so, for driving bank of other stocks farther down than they would have fallen for nothing except their own profit. There used to be rules against that, but the Bush run against regulation stopped all that.
So now, wait for it, the geniuses in the financial markets and in Congress are proposing a ban on much of the ghoulish short-selling and a ban on selling a mortgage to someone who cannot afford it and cannot prove that they can afford it.
Oh yes, the down-payment is back.
In the late 1980s, I was covering real estate for the New Haven Register and Freddie Mac brought me, along with a lot of other reporters, down to its palatial offices in New York to teach us about mortgages. We were required to underwrite a mortgage, to go through the process that bankers used (past tense, and, it looks like, future tense) to determine whether to grant a mortgage.
You needed a down payment, and you had to prove that you didn't borrow the money for the down payment. You had to have earned it. Then you had money tied up in the house so you were less likely to walk away.
Another thing: You must earn enough money so that the monthly mortgage payment cannot be more than 28 percent of your monthly gross income, and all housing expenses -- insurance, utilities and the like -- could not be more than 35 percent of your gross income.
It looks like we are getting back to that now. It's one of the suggestions for the rules and regulations to be put back in to be sure this doesn't happen again, at least not for the same reasons.
And who's leading the charge? George W. Bush, the same fool who decided we didn't need all this regulation getting in the way of the free market.
Well George, as you would say it, "Waaal, Ah guesses the free market ain't all that free after all." No George, it ain't.
The upcoming weekend looks like a late-summer, early fall dandy, cool and sunny. There is a rally at the United Nations Monday at 11:45 to show Iran's president, in the U.S. to make a speech at the U.N., what we feel about him and his policies. Now that the idiots at the Orthodox Union and the Council of Presidents of Major American Jewish Jewish Organizations stopped trying to make this a partisan political event, my wife and I will probably go. I don't know who's idea it was to invite Sarah Palin, but I'm glad smarter heads won out.
Anyway, have a great weekend and, for those in the Tribe, a wonderful Shabbos and a meaningful Slichot.
Until next time...