Our nation is currently experiencing a deep financial crisis due to the failure of major financial institutions, investment banks and insurance industry. It all started crumbling like the “house of cards” beginning with Fannie Mae and Freddie Mac, Lehman Brothers, AIG and others in line with bad loans from the sub-prime mortgage crisis. The “economic meltdown” precipitated late 2006 as borrowers experienced the “credit crunch” with respect to “real estate mortgages” that was ominously prevalent in the decline of housing market nationwide.
The entire network in the real estate and financial sector with hedge fund managers, underwriters, financial institutions processing the mortgage applications, mortgage brokers, realtors, homebuyers and sellers were primarily interested and vigorously involved in promoting and wrapping the deal with minimal and/or non-compliance of the standard rules and regulations that are specifically set up to avert such catastrophe.
The “housing market” bubble eventually burst contributing to the worsening of credit crunch and massive foreclosures across the nation. The commercial sectors were also hit in the process due to the streamlining of measures by the lenders and legislation by the “Congress” in an effort to slow down the escalating “credit crisis”.
Subsequently the ripple effect was felt in the job market with small businesses and medium size corporations struggling to maintain their credit limit from the sharp increase in interest rates on the borrowings and depletion of capital resources essential for survival in the highly competitive market economy.
Meanwhile, some investors diverted their attention from “real estate” to the “stock market” for short-term gains and as a result certain “stocks” earned the “preferred status” in stock value despite the lack of any performance history. The “stock market” was warming up with superficially inflated stock prices combined with speculators on “futures trade” in “oil stocks” mostly responsible for the elevation of crude oil price per barrel triggered the sensitive energy crisis.
At the top level, the monetary authority and incumbent administration as the “oversight” for the economic growth and development implemented policies including lowering of “prime” rates to an unprecedented level in recent times thus creating opportunities for financial institutions to outreach borrowers with no solid credit history. The euphemism by the “executive branch” of the government to display “patriotism” through “home ownership” is another factor for unscrupulous practices in the “housing market” debacle.
It has further come to light that some legislators are beneficiaries of personal financial deals as “VIP PATRONS” of the failed financial institutions such as “Fannie Mae and Freddie Mac,” “Lehman Brothers” and more. However, it does not exclude Presidential contenders’ “Campaign Advisors, confirmed to be the lobbyists/former executives” of those financial institutions thereby enlarging the conflict of interest in the oversight.
Hence, proving the theory….“Corruption and Cronyism thrives under Capitalism.”
Strategy:
The government proposal to bail out these Corporations indulging in reckless undertakings with staggering $700 billion of American taxpayer’s money is currently being debated in the House of Congress. There is also the anxiety over the “cavalier” approach by the “executive branch” for immediate approval of the “clean bill” i.e. without any protection of tax payer investment or oversight for such unprecedented and historic venture.
The irony is the “Treasury Department” and the “Federal Reserve Bank” with the primary responsibility to monitor and recommend any regulation in the financial sector is experiencing the “labor pain” after nearly twenty two months of gestation and demanding “Congress” to deliver regardless of the outcome!
With current “Presidential race” in process, one has to hope that this situation does not lead to the controversial “Pro-Life” vs. “Pro-Choice” debate on the financial crisis. It appears that “Congress” is in favor of “Pro-Choice” to ensure the safety and security of the bearer i.e. the taxpayer bankrolling the bailout of Corporations and their erroneous decisions.
The urgency by the administration to regulate the financial sector by granting unilateral authority to an “individual” i.e. the “Treasury Secretary” with a sum approximately equivalent to the combined GDP of “Argentina and Chile” rightfully arouses skepticism among legislators on both sides of the aisle. Some of them are also reminiscent of the scenario prior to the invasion and occupation of “Iraq” with a similar demand by the current administration.
“Fool me once, Shame on you”, “Fool me twice, Shame on me”.
Remedy:
Since the bailout is imminent and crucial for the stabilization of the financial markets, it is imperative for legislators to secure the investment with conditional offers;
Several economists and experts have come forward and presented their thoughts and strategies for the existing national crisis.
1. The consensus among all of them is to establish an “Independent Oversight” with absolutely no infiltration by “Special Interests” or “Lobbyists” posing conflict of interest. Both Presidential candidates also share similar views in this regard.
2. The proposal to invest in “mortgage-backed” securities to relieve the remaining financial institutions of the “bad debts” burden is to be reviewed and approved by the “Oversight Committee”.
3. The purchase price of these securities must be carefully taken into consideration with a set profitable return upon sale of these instruments. It is also important to identify the buyers and sellers.
4. Complete transparency in terms of “Open Bid” during purchase and sale of these investments is vital for investor confidence and enhancement of the investment value.
5. The huge “pay off” to “Corporate Executives” for the lack of judgment and utter failure in their performance is to be eliminated as a precedence to existing and future Corporations heading in that direction.
6. The “hedge fund managers” have to be subject to strict scrutiny and ethical standards and the issues such as “Management Fees” and “Asset Allocation” has to be determined in a manner to yield nothing less than “profitable return” to the investors i.e. the taxpayers.
7. The proposal by “Congress” to place a “Moratorium” on foreclosures must be honored on bipartisan basis to relieve the “homeowners” across the nation. At the same time, the home owners must be evaluated on individual basis by the lenders with “Oversight Committee” alongside and encouraged to make payments equivalent to rental payments or “interest only” on revised mortgage package whatever is affordable. Again, this offer should be made available only to the first home buyers dealing with foreclosures and not an “aggressive” investor with more than a single home. An aggressive sales and marketing of “foreclosed” homes to potential investors will assist in the revival of housing market as well as help communities restore social and economic security through property taxes used for funding public school education and other services.
8. The “external” audit must be conducted on financial institutions listed as “risky” and brought to public focus.
9. The firewall between the commercial and investment banks must be resurrected to protect public funds.
10. Markets must be revived with sound and solid lending practices in both private and public sector.
United States economy has proven record of accomplishment to rebound during any crisis throughout the twentieth century. The United States economy is resilient with a highly productive work force that has risen to the occasion and challenged the Market forces acting against it. The economic boom will resume and prosperity shared by the global markets.
The temporary turmoil in the market will be settled with prudent economic strategy, robust fiscal policy, leadership and confidence of the people of the United States of America.
Thank you.
Padmini Arhant
The entire network in the real estate and financial sector with hedge fund managers, underwriters, financial institutions processing the mortgage applications, mortgage brokers, realtors, homebuyers and sellers were primarily interested and vigorously involved in promoting and wrapping the deal with minimal and/or non-compliance of the standard rules and regulations that are specifically set up to avert such catastrophe.
The “housing market” bubble eventually burst contributing to the worsening of credit crunch and massive foreclosures across the nation. The commercial sectors were also hit in the process due to the streamlining of measures by the lenders and legislation by the “Congress” in an effort to slow down the escalating “credit crisis”.
Subsequently the ripple effect was felt in the job market with small businesses and medium size corporations struggling to maintain their credit limit from the sharp increase in interest rates on the borrowings and depletion of capital resources essential for survival in the highly competitive market economy.
Meanwhile, some investors diverted their attention from “real estate” to the “stock market” for short-term gains and as a result certain “stocks” earned the “preferred status” in stock value despite the lack of any performance history. The “stock market” was warming up with superficially inflated stock prices combined with speculators on “futures trade” in “oil stocks” mostly responsible for the elevation of crude oil price per barrel triggered the sensitive energy crisis.
At the top level, the monetary authority and incumbent administration as the “oversight” for the economic growth and development implemented policies including lowering of “prime” rates to an unprecedented level in recent times thus creating opportunities for financial institutions to outreach borrowers with no solid credit history. The euphemism by the “executive branch” of the government to display “patriotism” through “home ownership” is another factor for unscrupulous practices in the “housing market” debacle.
It has further come to light that some legislators are beneficiaries of personal financial deals as “VIP PATRONS” of the failed financial institutions such as “Fannie Mae and Freddie Mac,” “Lehman Brothers” and more. However, it does not exclude Presidential contenders’ “Campaign Advisors, confirmed to be the lobbyists/former executives” of those financial institutions thereby enlarging the conflict of interest in the oversight.
Hence, proving the theory….“Corruption and Cronyism thrives under Capitalism.”
Strategy:
The government proposal to bail out these Corporations indulging in reckless undertakings with staggering $700 billion of American taxpayer’s money is currently being debated in the House of Congress. There is also the anxiety over the “cavalier” approach by the “executive branch” for immediate approval of the “clean bill” i.e. without any protection of tax payer investment or oversight for such unprecedented and historic venture.
The irony is the “Treasury Department” and the “Federal Reserve Bank” with the primary responsibility to monitor and recommend any regulation in the financial sector is experiencing the “labor pain” after nearly twenty two months of gestation and demanding “Congress” to deliver regardless of the outcome!
With current “Presidential race” in process, one has to hope that this situation does not lead to the controversial “Pro-Life” vs. “Pro-Choice” debate on the financial crisis. It appears that “Congress” is in favor of “Pro-Choice” to ensure the safety and security of the bearer i.e. the taxpayer bankrolling the bailout of Corporations and their erroneous decisions.
The urgency by the administration to regulate the financial sector by granting unilateral authority to an “individual” i.e. the “Treasury Secretary” with a sum approximately equivalent to the combined GDP of “Argentina and Chile” rightfully arouses skepticism among legislators on both sides of the aisle. Some of them are also reminiscent of the scenario prior to the invasion and occupation of “Iraq” with a similar demand by the current administration.
“Fool me once, Shame on you”, “Fool me twice, Shame on me”.
Remedy:
Since the bailout is imminent and crucial for the stabilization of the financial markets, it is imperative for legislators to secure the investment with conditional offers;
Several economists and experts have come forward and presented their thoughts and strategies for the existing national crisis.
1. The consensus among all of them is to establish an “Independent Oversight” with absolutely no infiltration by “Special Interests” or “Lobbyists” posing conflict of interest. Both Presidential candidates also share similar views in this regard.
2. The proposal to invest in “mortgage-backed” securities to relieve the remaining financial institutions of the “bad debts” burden is to be reviewed and approved by the “Oversight Committee”.
3. The purchase price of these securities must be carefully taken into consideration with a set profitable return upon sale of these instruments. It is also important to identify the buyers and sellers.
4. Complete transparency in terms of “Open Bid” during purchase and sale of these investments is vital for investor confidence and enhancement of the investment value.
5. The huge “pay off” to “Corporate Executives” for the lack of judgment and utter failure in their performance is to be eliminated as a precedence to existing and future Corporations heading in that direction.
6. The “hedge fund managers” have to be subject to strict scrutiny and ethical standards and the issues such as “Management Fees” and “Asset Allocation” has to be determined in a manner to yield nothing less than “profitable return” to the investors i.e. the taxpayers.
7. The proposal by “Congress” to place a “Moratorium” on foreclosures must be honored on bipartisan basis to relieve the “homeowners” across the nation. At the same time, the home owners must be evaluated on individual basis by the lenders with “Oversight Committee” alongside and encouraged to make payments equivalent to rental payments or “interest only” on revised mortgage package whatever is affordable. Again, this offer should be made available only to the first home buyers dealing with foreclosures and not an “aggressive” investor with more than a single home. An aggressive sales and marketing of “foreclosed” homes to potential investors will assist in the revival of housing market as well as help communities restore social and economic security through property taxes used for funding public school education and other services.
8. The “external” audit must be conducted on financial institutions listed as “risky” and brought to public focus.
9. The firewall between the commercial and investment banks must be resurrected to protect public funds.
10. Markets must be revived with sound and solid lending practices in both private and public sector.
United States economy has proven record of accomplishment to rebound during any crisis throughout the twentieth century. The United States economy is resilient with a highly productive work force that has risen to the occasion and challenged the Market forces acting against it. The economic boom will resume and prosperity shared by the global markets.
The temporary turmoil in the market will be settled with prudent economic strategy, robust fiscal policy, leadership and confidence of the people of the United States of America.
Thank you.
Padmini Arhant
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