As the year winds down in a couple days, I can't help but make my own list of events that moved the world or just me in 2011. Can't say I'm sad to see 2011 go, and 2012 looks real good, right now.
My points are here and in no particular order but rather just a rambling list:
- We learned the term 'Arab Spring' where all sorts of Arabic dictators were swept out of power, only for the Arab people to realize afterwards that they didn't know what to do next.
- Bin laden & Gadhafi, among others, finally got to meet their makers.
- US Forces are the best there ever was.
- The last Space Shuttle flew and landed.
- "Things are getting better, you just can't see it or feel it," said the Naked Emperor.
- Andy Rooney died, and will be sorely missed. I wish I knew how to complain like he did.
- One of the biggest earthquakes and subsequent tsunami's hit northern Japan, killing 16,000 and melting down 4 nuclear reactors.
- The NBA season was delayed. Nobody noticed.
- I joined the 30% of the US population and got a real smart phone, a computer, not just a dumb phone that gets email, after I learned Blackberry has two years left to live.
- 9/11 was remembered as 10 years had passed. We realized just how quickly America forgets...
- Budget cuts are over a 10 to 20 year period, so they really don't cut anything.
- The Cards win the series, the Cards win the series! It may have been one of the best post season runs -ever.
- Interest rates got lower. So did home prices.
- The 99%'ers showed up and said we are tired of the 1%'ers walking all over us.
- Everyone took a shot at running for President as a Republican.
- We learned Obama doesnt have a 'real' birth certificate, and all politicians don't have 'real' morals, memories, attention spans or ethics for that matter.
- Politicians look the same in prison as they do in office.
- Wall Streeters don't get prosecuted, they just skip one year of bonuses, then back to the status quo.
- The Fed printed money without limit only to tighten lending further so it can't be given out.
- Tweeting can be dangerous, especially for movie stars, politicians, and drunk people.
- Obama added $4 Trillion dollars to our national debt in 3 years, a feat that took Bush 8 years to do.
- 80% feel that government is broken in one way or another.
- Unemployment hovers somewhere between 8% and 16% depending on how they cook the numbers. Sorta like re-baking the bread after it has already been sliced.
- Charlie Sheen spent the year winning...
- Stimulus Spending has admittedly now done nothing but paid off political favors and raised the debt.
- Lot's of movie stars got divorced, replenishing the movie star heard for the picking.
- The apocolypse didnt come, as we all know that's in 2012...
- That 2012 will be better than 2011...Happy New Years.
D
FHA Nearing Insolvency
In some regards 2012 is shaping up to be just like 2008. As Yogi Berra once said, "It's like de'javu, all over again...". FHA, or the Federal Housing Administration, is on track to go bankrupt sometime next year. Destined by poor loan underwriting, low and effectively no down-payments, the FHA and the US taxpayer will add FHA to the scrap heap of failed programs Freddie Mac and Fannie Mae. Yet FHA continues to crank out loans with no reserves to support them as existing loans continue to rack up losses. The inevitable FHA bailout may eclipse Freddie and Fannie losses combined.
Govt. FHA Becomes New Sub-Prime Lender
As the mortgage industry collapsed in 2008, FHA, the small low down-payment government backed lending agency, stepped in to become the primary market lender spurred by a U.S. Government desperate to prop up a housing market that was dropping like a rock.
FHA became the only primary sub-prime and low/no down-payment lender overnight, tripling the amount of loans it originated. FHA's lending policies effectively kept its required 3.5% down-payment at a theoretical zero, through liberal card tricks like "gift credits", "deposit assignment credits" and "seller rebated amounts" so no borrower money was really at the closing table. Failing to change their risk modeling based on the new sub-prime client base, FHA's losses have climbed dramatically. Even today, FHA has lagged behind the other failed GSE programs Freddie and Fannie to tighten lending standards, continuing it's lending charade.
FHA's Dramatic Rise in Loans Made
FHA Sees Crisis Period Loans Failing Much Faster
As anyone but FHA could guess, the old risk models didn't work and almost immediately loans originated in the 2008 crisis and later went bad much quicker and in much higher numbers:
FHA Capital Levels Fall Dangerously Low
- FHA's Required Capital Reserves Level - 2%
- FHA Jan. 2008 Reserves - 3%
- FHA Dec. 2010 Reserves - .50%
- FHA Dec. 2011 Reserves - .24%
Simple math shows FHA will run out of reserves sometime in 2012. This lack of reserves also prevents FHA from participating in any new homeowner assistance programs since subsidizing loans or lowering standards even further erodes reserves even quicker. In October 2010, FHA raised insurance costs to all FHA mortgage holders in an attempt to pass on losses to you know who, the consumer.
Taxpayer Losses Will Grow On Continued Losses
Losses continue to mount at Freddie and Fannie, the two GSE's (government sponsored entities) that were taken over by the US Treasury in 2008. FHA will soon be added to this list as well:
- Freddie Mac losses to date $70 Billion
- Fannie Mae losses to date $115 Billion
- Estimated total losses through 2013 $221B-$363B
These loss estimates were made in mid 2010. Losses are now feared to be even worse than estimated. If FHA goes under, and I can't see why it won't, losses will be much higher due to the nature of the lower credit profiles at FHA, and may be double our existing losses. This will bring the total loss in home mortgages to near $1 Trillion. These losses add to the national debt, but are not added to the our existing annual budget deficits being quoted in the media. What is clear to see is that the governments social experiment of underwriting home ownership for every person in America will be a costly failure.
D.
I posted my thoughts on where bank fees were headed in October, and now things are much clearer. Yes, the cost of banking has went up for banks and their customers. One thing that is under-reported; the fees imposed are a mere fraction of the costs that banks are absorbing under the huge regulatory burden placed upon us all by the Democrats and the Obama administration. Fees are never absorbed by a government or an industry. It is always passed on to the most basic subset: the consumer.
Here are a few quick points for all consumers looking for the right bank in the higher priced times and then a re-post of my October blog follows.
1) Move to a Community Bank. Community Banks are setting costs in a break even move against regulatory fees. Big Banks are using this opportunity to create new streams of revenue and profits for their coffers. Big Banks caused this mess and the ensuing burden on the system. Community banks never participated in the Wall Street debacle, and are only invested in the community and customers they serve.
2) The right bank will offer you options and products to minimize your cost of banking. Community Banks are bundling products and services and offering the lowest cost to deliver you everything you want at the lowest price point.
3) There has never been a free lunch. Nothing in the world has ever been free and banking is no exception. If we take a pragmatic approach to having instant and immediate access to the financial system of accounts, ATMs, debit cards, online systems and that iphone app, someone has to pay for that.
4) These regulations are another attempt to redistribute and socialize the world monetary system. However, everything for free for the masses has never worked throughout history and it didn't with Dodd-Frank Regulatory Reform either. Why do you think both sponsors of this heinous regulation retired and didn't re-run for Congress? If you are a capitalist, please remember to exercise your right to vote.
Here is my blog from October, 2011:
Bank of America announced this past week they will begin charging a monthly fee of $5 for customers to carry debit cards. Of course it was national news, and ran on all the networks. Regions Bank said they were doing a $3 fee and Citigroup was still evaluating their costs. Well folks, it's coming. Soon banks will be charging fees for all kinds of things that used to be free. Banks charge fees to cover the costs of services demanded by consumers. Do you think that 100,000 ATMs across America don't cost anything to develop and operate? I've joked recently that big banks may have a cover charge at the door! The cost of banking is going up. Thank you Barney Frank, the Democrat controlled Congress, and Mr. Obama. Regulatory reform has injected government controls into the free market banking system, all in the interests of saving the consumer money. When did government ever save the people money? The government has said, we can make the big bad banks charge you less. But, when one fee is capped or eliminated, other fees must take their place to financially support the system. Free checking will be next due to the elimination of overdraft fees. The government once again is attempting to make the Haves pay for the cost of serving the Have-Nots. It just isn't going to happen.
A free market system is best left to seek its own level on costs and fees for service. The American consumer has always been good at determining what are respectable costs and what are not. If the costs are too high, the consumer quits the service. The service must readjust to an acceptable level or fail. Just look at the backlash from Netflix raising fees for their service recently. The consumer effectively said no. Netflix has lost hundreds of thousands of customers overnight. It's too bad the government hasn't yet figured that out.
D
