Politicians talk about the uninsured. Special interests argue on behalf of those with pre-existing conditions. But why is no one wondering how doctors are affected by the new law? They’re the ones on the frontlines dealing directly with new patients, as well as the red tape that makes bureaucracies go round.
Politicians proclaim the benefits of small business while on the campaign trail. But when they meet in the seedy halls of Congress, they have no problem doing whatever they can to stifle, regulate, and subdue their progress. Instead of siding with entrepreneurs, these politicians often side with political allies and cronies that helped put them into office.
Just because you’re retired doesn’t mean you have to stop working. Especially now that you have all the time in the world to do what you really want. Entrepreneurs don’t only come out of Silicon Valley. They come from all walks of life, from all different ages. If you’re retired and want to stay active while you relax, then find out the steps you need to take in order to start, manage, and grow your next small business.
Austrian economics does more than tell you what happens when the government disturbs market forces. In the hands of knowledgeable investors and entrepreneurs, it can tell you exactly what to expect from the market. Market behavior depends on how people behave. And how people behave is central to the Austrian perspective.
The U.S. dollar has been the world's reserve currency for almost a century, and already there are signs it may be in decline. But that doesn't mean it's not still valuable. On the contrary... As Chris Mayer explains, there are many reasons the U.S. dollar will remain relevant on the world stage for years to come. Read on...
World War II might have dragged the country out of the Great Depression, but it did so at a great price. Central planning took center stage, and politicans and bureaucrats suddenly knew what was best for America, the economy, and your life. On top of that, they replaced the free market with a new economic system… Creditism.
If you’re good at something should you be penalized so others have a chance at success? Should award winning actors and actresses be barred from future Oscar ceremonies to give other men and women the chance to succeed? Success should always be rewarded and encouraged. But what happens when you have a government that wants to even the playing field and take away the spoils of success. Gregory Bresiger finds out...
Practical people often pooh-pooh fiction reading as a time wasting dalliance, dominated by a Marxist coloring of the world. However, fiction readers were given a scientific reason recently for spending hours absorbing fanciful figments of someone’s imagination.
Argentina is suffering the ravages of government debasement of the currency -- i.e., inflation, the process by which government pays for its ever-increasing debts and bills by simply printing more paper currency. The expanded money supply results in a lower value of everyone’s money, which is reflected in the rising prices of the things that money buys.
When government expansion is allowed to continue unabated or when it casts a heavy regulatory shadow on America’s entrepreneurial spirit, the freedoms that we’ve come to know, and perhaps take for granted, slowly begin to slip away.
Its acceptance is as widespread as its justification is important, for it provides the rationale for the Federal Reserve’s unprecedented monetary expansion since 2008. While critics may dispute the wealth effect’s magnitude, few have challenged its conceptual soundness. Such is the purpose of this article. The wealth effect is but a mantra without merit.
Baron Rothschild, the famous French financier, was once heard to say that he knew of only two men who really understood money -- an obscure clerk in the Bank of France and one of the directors of the Bank of England. “Unfortunately,” he added, “they disagree.”
The new reality of Obamacare’s tax credits has left finance reporters to pen articles warning readers to “take care” when considering a tax credit and providing strategies for how best to “protect yourself.” So what do finance reporters know that the White House doesn’t?
Nihilo ex nihilo fit. Out of nothing, nothing comes. First put forward by ancient Greek philosopher Parmenides in the fifth century B.C., Thomas Aquinas and St. Augustine later used this axiom to prove that the universe needed a “first mover” to get things going. Even if the whole thing began with some kind of “Big Bang” moment, it still needed a banger to bang it. Who? God, of course.
Economic theories don’t lend themselves to laboratory testing, so the work of a national appraisal firm is especially enlightening. A new study lends support to the Austrian business cycle theory, which says that the less government is involved, the faster a market will recover.
What positive steps can we take? The energy that is now expended by well intentioned, freedom-seeking individuals on the destructive course of politics can be turned into powerful steps that will have a positive effect on the future. All are moral, right and just. None require aggressing. Consider the following...
The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk.
Politicians and bureaucrats are notorious for manufacturing euphemisms -- clever but deceptive substitutes for what they really mean but don’t want to admit. That’s how the phrase “revenue enhancement” entered the vocabulary. Some of our courageous friends in government couldn’t bring themselves to say “tax hike.”
It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards a few weeks ago. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.First up, […]
The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self-sufficient.But our systems of state charity — aka welfare — have too frequently had the opposite effect: They have actually created dependency. It is time to rethink the way we help people.I’m going to […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
President Obama crowed in his State of the Union speech about the economy, even mentioning “a rebounding housing market.” Maybe he was referring to friends in high places, like the seller of Penthouse One in New York, which just closed for $50.9 million, all cash. Millions of mere-mortal homeowners likely wanted to throw something at […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the HealthCare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor supply issues. Given the mounting difficulties with and growing concerns about the […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
What the home and mortgage market needs — and it will not recover until then — is a rebooting to current values. To do that, principal amounts must be reset. They need to be reset not by government force, but by letting the market work. Let bankrupt mortgage holders fail.
The housing market has gone nowhere since the meltdown. Some 14 million homeowners are underwater on their mortgages. A good percentage of those people have stopped making their monthly payments.
In the initial wave after the housing crash, there were millions of strategic defaulters: homeowners who could afford to make the payments, but walked away because they believed it was the most prudent financial decision to make.
Now there are vast numbers of strategic squatters. People who could pay but aren’t. Instead of walking away, they remain in the home knowing that it may be not months, but years, before the lender will evict them. The average foreclosure now takes 728 days. In a few states, it’s over a 1,000 days. And this is after the lender has filed a notice of default. Some loans have gone 500 days delinquent before Bank of America has filed a notice to start the process.
This can happen only in a market dominated by the government. Fannie Mae, Freddie Mac, and the FHA comprise 90% of the mortgage business. Private lenders could never survive holding mortgage loans en masse that are nonperforming. Lenders must collect payments or they can’t pay their bills, or pay their lenders, for that matter.
There is no political will to let Barney Frank’s favorite entities go away. However, there is a bit of market-clearing good news. FHA auctioned 9,500 mortgage loans recently, and investors, including Lewis Ranieri Selene Investment Partners, paid an average of 36 cents on the dollar for these loans. The sales prevented $1 billion in fiscal 2013 losses for the agency’s insurance fund.
FHA is in a bit of a pickle these days. It’s facing a $16.3 billion shortfall and it may be forced to thrust its tin cup in the Treasury’s direction for the first time in its history, starting in the Great Depression.
In the new edition of my book Walk Away, available to Laissez Faire Club members for free download, my solution to the housing crisis is to let Fannie, Freddie, FHA, and the too-big-to-fail banks fail. The mortgage paper these entities hold would trade in a bankruptcy auction at pennies on the dollar. The buyers of these mortgages would quickly reach out to the borrowers and attempt to restructure the notes in ways that made sense to lender and borrower.
In my book, I provided the example of the mortgage legend Mr. Ranieri, whose firm would buy mortgages at a discount. The company felt that once the mortgage was obtained, it would be imperative to contact the borrower immediately and begin negotiating. Mortgage buyers spending real money don’t wait 500 days before they do something.
The properties are valued quickly and the borrower’s financial wherewithall assessed. A rewrite of the mortgage is done right away with terms reflecting the market value of the home, or foreclosure is started.
You might be wondering why the FHA doesn’t just go to homeowners themselves and make their own deals, rather than sell to investors at a steep discount. That’s because the FHA doesn’t have the legal authority to forgive principal. The FHA also can’t foreclose on a property and turn around and lease it to the defaulted owner. There’s as much flexibility at the FHA as there is in the TSA line or at the DMV. They have their rules and they’re sticking to them.
Of course, winning bidders are building in some cushion into their bids. They aren’t bidding 36 cent dollars if they think that’s what the underlying collateral is worth. They might think on average the houses securing the mortgages are worth 60 or 70 cents on the dollar of the loan amount.
But let’s not cry over spilled loan principal: It’s great news that these mortgages will end up in private hands. But (you knew a “but” was coming) these not quite 50,000 mortgages that may be peddled by the end of next year are a sliver of the 734,290 seriously delinquent loans in the FHA portfolio. Seriously delinquent loans are 9.6% of the 7.62 million loans on its books.
That’s more than 2.5 percent points higher than the 7% overall rate of serious delinquency tracked by the Mortgage Bankers Association, which tracks 50 million home loans.
Also in the good news department is Fannie and Freddie might start getting rid of some of their bad paper. If they do, the delinquent loan sale market might be $30 billion next year. According to American Banker,
“The two taxpayer-owned companies are under a mandate from their federal regulator to dispose of nonperforming assets. Fannie Mae, which has nonperforming loans with a total unpaid principal balance of about $233 billion, is planning to begin qualifying potential bidders for some of those mortgages as early as the first quarter of next year.”
To sit on foreclosures is expensive. After FHA acquires a delinquent mortgage from the servicer, it pays for upkeep and marketing to the tune of $28.78 per day per house. Depending upon whom you believe, FHA is losing 63-71 cents on every foreclosure. Selling the delinquent loans seems to make sense. Especially in Florida, where the loans they auctioned were an average of 1,114 days delinquent.
“We’re seeing between a 15-20% better recovery than we would if those same loans went all the way through to foreclosure, and that’s a pretty big change,” Carol Galante, the FHA’s acting commissioner, told American Banker.
But Ed Pinto, Fannie Mae’s chief credit officer in the 1980s, wonders. “I’m having a hard time figuring out where they’re making up much financial benefit,” he said. He sees the auction as just a “backdoor” way of doing principal reductions and “doling out other pots of money.” It turns out that some of these mortgages may be eligible under a Treasury program for reimbursement up to 63 cents on the dollar of principal forgiveness.
So there is a ray of hope for market clearing. But alas, it will be on government time. An unfettered market would have taken care of this years ago. At this rate, it will be decades.