Think the mortgage crisis is over...think again

Our federal government would like you to believe that the subprime mortgage crisis is over, that all of those loans have either defaulted or modified and that the U.S. housing market is beginning to grow again. I have always maintained that subprime loans were not the weakest pier holding up the fake housing market, but just the easiest target for the Fed and their lackey media to point accusing fingers at. Unfortunately Federal Reserve chairman Ben Bernanke and his crew have been too busy patting themselves on the back to realize that the second collapse, this time in the Alt-A segment, will make the first round look like a mere market correction.


The next crash will be fueled by an avalanche of “Re-Casts” of Pay Option Arms. Pay Option Arms are adjustable rate mortgages that the give the borrower options on monthly payments. Typically there were 3 options: 1. Standard amortization (normal principle and interest amortized over the life of the loan) 2. Interest only (the borrower pays only the interest due on a monthly basis) 3. Minimum payment (the borrower is making a payment that does not cover all of the interest due and results in a negative amortization). These loans were sold at the height of the bubble and sold as a way to afford more house than you would be able under normal underwriting guidelines, but the housing bubble would bail you out before your first recast in 5 years. POP, went the bubble and now these mortgage holders are stuck with a payment they cannot afford and a market that won’t support their outstanding balance. The following example cited by the attorney general of California illustrates what many of these borrowers are up against. On a $460,000 loan (typical by California standards in 2005) the minimum monthly payment would be $1,479 that is using a 1% teaser rate and a 2.9% margin (all typical for the 2005-06 timeframe). The payment increased steadily each year until it hits the 5 year re-cast. At this point the payment will increase to $3,747. With no market left to sell the house into, and no equity left to refinance this loan, is there any wonder that Californians will begin walking away from these houses in droves?

Figures from a recent issue of Business Week show that there is $469 billion Alt-A loans active and outstanding in the U.S. The Alt-A segment can include stated income loans where the borrower’s income as stated on the application was not required to be verified by the lender, as well as the pay option arms. With the bulk of these pay option arms being originated in 2005 and 2006 and most of them being recast in 5 years, it starts to become clearer what we are up against. We are currently seeing about 3 billion of recast per month, but scheduled as well as neg-amortization forced recast will increase to 10 billion per month in October of this year, and steadily increase to a peak of 15 billion per month in September of 2011.

All the while Fed Reserve chairman Bernanke insists that the worst is behind us. Do we really want to trust a guy who so completely misjudged the first round of the crisis, claiming that the “contained” losses would not exceed $100 billion, an estimate that proved to be at least 60% low? His track record at predicting such things is at best “Horrible”. The simulative policies of the Obama administration are nothing but a very weak band-aid on a gaping and hemorrhaging wound. These fake stimulus policies while claiming to have increased home sales, have effectively cannibalized the market. Their continued claims of victory only show the lack of respect for the intelligence of our “Everybody gets a trophy” society. As the banks continue to hide behind the puffed results of handpicked stress tests and sit on the rolls of federal bailout monies, the next level of foreclosures will cause further and deeper write downs. The Feds would prefer to keep the American public in the dark about this, knowing that yet another bailout will not be tolerated.

Wells Fargo may take the biggest hit of all; Wells took over Wachovia, which had already taken over Golden West and their pay option subsidiary World Savings. Since you are what you eat, Wells is now saddled with a pay option portfolio well over $100 billion. Bank of America and JP Morgan are also holding a ton of this soon to be worthless paper through their acquisitions of Countrywide and Washington Mutual. While getting fat off the huge servicing portfolios initially, the note is about to be called.

It is obvious to me that the Fed has no clue about how the effect of their protected interest rate environment and accommodating policies are having on the real estate market. Nor do they realize what is staring them in the face. It is time for the American public to realize that these guys are overwhelmed and are “faking it”. Now is not the time to get into the Real Estate market, despite the spin coming out of Washington, we are nowhere near the bottom yet.

Arizonas new immigration law just enforces existing federal law

Arizona SB 1070, signed by Governor Jan Brewer on April 23, and going into effect July 29, is being slammed as racist and anti American by special interests from Los Angeles mayor Antonio Villaraigosa to President Barrack Obama. But does this law radically change the responsibilities of Arizona law enforcement or is it the Grand Canyon state just sharpening the teeth of federal laws that have been in effect, if not enforced, for years.


What the 16 pages of text that is SB 1070 does is to address the documentation that all aliens in this country are supposed to have on them at all times as required by federal law. It also requires that Arizona law enforcement officers coming into contact with, in the course of normal police business, someone that they suspect of being an illegal alien, to investigate the suspicions and to proceed with the findings as required by law. The law does not allow police officers to stop someone because they suspect the person may be in the country illegally. In fact a training course is being required of all officers to train them use factors other than race when establishing “reasonable suspicion”. If an officer stops a driver for speeding or another traffic offense in a known smuggling corridor, and the driver cannot provide identification and gives conflicting information about his background, this would create a “reasonable suspicion”.

Our courts have always upheld “Reasonable Suspicion” as acceptable when investigating other crimes. This law simply requires officers to apply something that they have already learned to something that has been illegal for years. We wouldn’t ask or accept an officer to turn a blind eye to drug smuggling or armed robbery indicators in a routine traffic stop, why would we want them to ignore obvious immigration violations.

The law has certainly provided a platform for political “grandstanding” by parties on both sides of the argument. Arizona Governor Brewer has seen her approval rating skyrocket to 85% in the aftermath of the bill signing. There is even a small rumble of a possible campaign for President, quite a task for a governor, who has never been elected to that post by voters in her state. Brewer, who intends to run for a full term as governor, stepped into the role in January 2009, when Janet Napolitano left the post to become President Obama’s Secretary of Homeland Security. Former Alaska Governor Sara Palin, who many believe will run for President, has urged all Border States to follow Arizona’s lead by passing identical laws. In fact support is growing in many non Border States such as South Carolina and Missouri. On the other side is Los Angeles mayor Antonio Villaraigossa, who has successfully led a resolution to passage by the LA city council to boycott all Arizona businesses and products within the city limits. The opportunistic Villaraigossa had neither answer nor solution, when it was pointed out to him that roughly 25% of the electrical power to the city of Los Angeles is provided by the state of Arizona. A fact not lost on Arizona supporters of the law. The law has also been criticized by President Obama, who in an Iowa town hall event stated,” if you are a Hispanic American in Arizona, your great grandparents may have been there before Arizona was even a state, but now suddenly if you don’t have your papers and you took your kid out to get ice cream, you’re going to be harassed”. This type of twist indicates the Presidents complete lack of knowledge of the law, or his lack of respect for the knowledge for the citizens of the state of Iowa, whom he was addressing. The world of sports has not been immune either; we have seen the Phoenix Suns wear Jerseys labeled Los Suns in an NBA game in support of owner Robert Sarvers opposition to the law. San Diego Padres first baseman Adrian Gonzalez has said that he will boycott the 2011 major league all star game scheduled to be played in Phoenix. Unless Gonzalez, who was born in San Diego raises his current batting average of .266 he won’t need to worry about it, as he likely won’t be invited anyway. If Gonzalez, whose team plays in the same division as Arizona’s Diamondbacks really wanted to make a statement why not boycott the games in Arizona on August 6,7,8 of this season. These are games in which Gonzalez will be paid to appear in. If selected to the all star team he will not be paid for that appearance. Gonzalez stand doesn’t look so gallant when viewed in this light.

The controversy surrounding Arizona SB 1070 is not going away anytime soon. President Obama has instructed Attorney General Eric Holder to consider challenging the law in court. The furor is sure to escalate as other states and even municipalities within those states consider similar legislation. One fact that cannot be argued, is that Illegal immigrants have become a huge problem for the state of Arizona. This new law indicates that they have tired of waiting for Washington to enforce the current federal regulations regarding illegal aliens. This new legislation simply gives law enforcement the ability to enforce pre-existing laws more easily. Until Washington changes the federal laws to make it legal for anyone gaining physical access to “the amber waves of grain” to legally stay here, they should support the effort in Arizona not fight it.

Is Tony La Russa losing his grip on the Cardinal clubhouse?

We have all witnessed the black eyed glare, heard the acid tongue responses, and tolerated the arrogant attitude that has become the trademark of Tony La Russas post game press conferences. But with his team in contention year in and year out, his “Brat Act” has been accepted by fans, management, the media and his team. He has even been successful at “bullying” the front office into making personnel moves that support his short term agenda at the expense of the organizations long term development. La Russa, who has been managing in the majors since 1979, has never been accused of losing control of a team before, but in light of recent developments and with two thirds of his roster stocked with players who were not even born when La Russa started managing, is it possible that Tony La Russa is losing his influence over the Cardinal players.



There were some hints of this possibility last season; the team was in contention early despite one of the strangest situations in Cardinal history. Chris Duncan, the son of Cardinal pitching coach, and long time La Russa buddy, Dave Duncan was mired in a two and a half year long slump. The fact that Duncan had even made the roster out of spring training raised eyebrows all around Cardinal nation, when La Russa kept inserting him into the lineup night after night, the fans and the media loudly questioned the favoritism. In typical fashion La Russa snapped back, defending Duncan and his right to be in the lineup. But as RBI opportunities kept wasting away amid the rising stack of strikeouts, you could almost hear the players questioning why this guy kept getting chance after chance.



St Louis has always been considered a team friendly media town as it relates to its sports teams, one can only guess how this act would have been covered in New York or Philly. But in the middle of one of the most controversial media storms in recent Cardinal history, General Manager John Mozeliak announced that the team had traded Chris Duncan to the Boston Red Sox for the recently designated Julio Lugo. This brought on irate reaction from both La Russa and Dave Duncan, who openly questioned the organizations motives in moving his .175 hitting son for a player that had been designated for assignment(meaning the Red Sox were giving up on Lugo). La Russa and Duncan immediately went into “pout” mode; La Russa was mollified some 3 days later when the Cardinals acquired Matt Holliday, a player Tony had long campaigned for, from the Oakland Athletics. Holliday immediately sparked the team that went on to run away with the division and the saga of Chris Duncan was lost in the celebration, except for Dave Duncan. The cardinal pitching coach continued to sulk the rest of the season, even taking a leave of absence when the teams highly touted first round draft pick, pitcher Shelby Miller, was brought in for a meet and greet with the Cardinals staff.

After a quick exit from post season play, both La Russa and Duncan hinted strongly that they may not return for the 2010 season. Cards owner Bill Dewitt Jr. was able to convince La Russa to return under yet another 1 year contract, and La Russa was then able to convince Duncan to return, although Duncan still insisted on letting everyone know that he was not “personally” happy. I believe that Dave Duncan may be the most overrated person wearing a major league uniform. La Russa has canonized him in St Louis constantly pointing out reclamation projects such as Woody Williams and Jeff Weaver but ignoring the failures such as Kip Wells and Rick Ankiel. Duncan is eager to accept the credit heaped upon the Cardinal pitching staff, but let’s face it; a staff led by Chris Carpenter and Adam Wainwright is going to be tough regardless of who is charting the pitches. I believe that Duncan’s ego has ruined the confidence of many promising young prospects: Reyes, Perez, and Motte, to name a few. And on more than one occasion it has been suggested that the helpful Carpenter and not Duncan has been the primary reason that some pitchers have seen remarkable results after putting on the cardinal’s uniform.

La Russa likes to fancy himself as a players manager, stating that he would never show up one of his players in public. That appears to depend on who the offending player is. On several occasions we have seen La Russa berate shortstop Brendan Ryan in plain view of the stands and the television cameras. He has done the same thing with outfielder Colby Rasmus and his disdain for former Cardinal pitcher Joel Pineiro was obvious. Pineiro never got a fair shake from La Russa or Duncan after he showed his disgust on the mound with Chris Duncan making 2 errors in one inning one night in San Diego. Tony clearly has his favorites and that; I believe is where he is losing his credibility in the clubhouse. Albert Pujols is considered by many, including me to be the best hitter in major league baseball, and he is clearly La Russas favorite son. Pujols lack of respect for the directions of third base coach Jose Oquendo while running the bases is legendary. When asked about Albert’s base running blunders, La Russa responds with something about Albert being a great hustler. Apparently being a great hustler does not require running out ground outs or pop outs, as Pujols is routinely seen dogging plays that would get most any other player benched. Recently Pujols was on second base with Matt Holiday batting, when Holliday failed to run towards first base after a dropped third strike, Pujols howled and gestured wildly at Holliday, in effect showing him up on the field. The play was an obvious mistake by Holliday, but Pujols behavior was no different than that of Pineiro a couple of years earlier.

La Russa has also has a public feud with former all-star third baseman Scott Rolen. This has been reported by the press as dust up over Rolen being less than honest about an injury to prevent being removed from the lineup. It didn’t seem right to me that La Russa would make it so personal and public, even embarrassing Rolen at a speaking engagement after the 2006 World Series. I believe that the real problem goes back to a time earlier that same season when Rolen called out Pujols for standing at the plate and staring down homeruns, before going into his slow trot around the bases. Rolen as he proved this past weekend is an old school professional who puts his head down and sprints around the bases after hitting a home run. La Russa never forgave Rolen for calling Pujols out and used the injury situation to let Rolen know who the boss is. Rolen, after asking for and being traded has maintained the high road and even attempted to “bury the hatchet” with La Russa last season on his return to St Louis with the Reds.



I believe that La Russa may have done himself in with his latest stunt this off season, when he named Mark McGwire hitting coach. While I don’t believe that the hitting coach at the major league level plays a significant role, it was La Russa and his ego that had to thumb his nose at the media and public with this move. After weathering the media storm in spring training about his past steroids usage, La Russa has repeatedly defended McGwire’s qualifications as a hitting coach, when in fact the only requirement is to be a friend of Tony. I don’t expect Albert Pujols or Matt Holiday to listen to McGwire and they aren’t going to. But La Russa has gone on record as claiming that Mark will do great things for Brendan Ryan and Skip Schumacher. The problem is that they have been two of the three biggest disappointments in this first month and a half of the season. If they don’t start hitting, the media will start to question McGwire’s value to the team and the ground work will be laid for another Tony vs. the media feud.

The younger Cardinal players who have come through the minor leagues at a time when they are having the demons of steroid usage drilled into their heads have to be wondering why is our hitting coach the poster boy for the steroids era? As they continue to watch the managers favorites play and conduct their selves by a different set of rules, will they continue to blindly follow this manager in his fourth decade of managing. The cardinal’s roster is the most talented in the central division, if they do not respond and win this division, then the question will have been answered: Tony La Russa has lost his fastball as a manger of today’s players.

Our current form of government no longer works

Has government at the national, state and local levels become too big? Are there too many layers, with enough overlap to embarrass the word redundant? Has our government become the six foot fourth grader, too big to get out of its own way? If you asked those questions to 5 different people on 5 different days, you would no doubt get 25 different sets of answers. But the one fact that most would agree to, is that our current form of government is not working.




One only needs to look at the mess that is the state of Illinois to drive this point home. With the state currently 12 billion dollars in debt, the legislature was wrapping their latest session in Springfield, with a proposed budget so far out of balance that selling the city of Chicago to Wisconsin wouldn’t get them back to even.



On the last day of the session the states once proud horse racing industry awaited the fate of SB3146. This bill as proposed would allow the Chicago tracks of Arlington and Hawthorne to install 1200 slot machines at each facility. The states second tier tracks, Balmoral, Fairmount, and Quad city downs would each get 900 machines. It is estimated that the machines would provide new annual revenues of $400 million for the state coffers. In addition the states racing industry would receive a much needed boost. In all likelihood Hawthorne and Fairmount will be closing without the passage of this bill. The racing industry in the state of Illinois and the businesses that support it, account for approximately 35,000 jobs. Jobs that will disappear if the states tracks are allowed to die.



This sounds like a no brainer, and early role calls indicated that the bill had overwhelming support in both the House and the Senate. After all the citizens of Illinois have never been adverse to gambling. In addition to the tracks, the state is home to several gambling boats and even recently allowed public video poker machines in many areas. But not so fast sweetheart, the existing gambling boats, which are owned by large out of state gaming companies, are opposed to expanded electronic gaming at the racetracks. They know that racing in the state is on life support and see an opportunity to increase their already sizable piece of the gambling pie, should racing fail.



Five senators from districts that are home to casino boats are vehemently opposed to the bill, which comes as no surprise nor a threat to passage when the vote is called. Therein lies the rub, WHEN the vote is called. Senate President John Cullerton (D-Chicago), fearing the withdrawal of support by the 5 casino senators for other legislation that he favors, refused to call the bill for a vote. I do not understand what the 5 Senators are afraid of, it’s not like the boats are going to pack up and leave just because the racetracks get slot machines. I guess it is possible that the 5 may find the gaming companies and their powerful lobby may be a tad less generous with perks and donations next year, if they don’t get things their way, but that negatively affects THOSE 5 PEOPLE. It is unbelievable to me that 5 people(6 if you include Cullerton) can stop a bill that means 35,000 jobs, hundreds of millions in new state revenue and has the support of the citizens of the state as well as a large majority of the people they elect to represent THEM in such matters.



The Definition of Democracy is: government by the people; a form of government in which the supreme power is vested in the people and exercised directly by them or by their elected agents under a free electoral system.



This definition no longer applies to the government now being executed in this county. Scenarios like that of the “Springfield 6” are being played in every state house in the country. And those shenanigans pale when compared to what goes on in Washington DC. Is there a way to fix the problem? Term limits would certainly be a solution, but how are we going to get that passed, by the very people they would limit. Term limits by ballot box, is the answer that you will get from the elected, but they know that our election process has become so tainted by money that it just doesn’t happen. As ridiculous as it sounds, violent revolution might be the easiest way to overthrow what has become something far less than Democracy.

Reflections as my daughter graduates from High School

My daughter is taking her last final exam of high school this morning, and it has put me in a rather melancholy state of mind.  Since this is an exam for an Honors French class, her pops didnt even consider offering any help. Come to think of it she hasnt sought out my help in exam preparation for a few years now. But it doesnt seem that long ago that we would spend thursday evenings after dinner preparing for the Friday spelling test over words containing 4 or 5 letters. I hope, but rather doubt that her memories of those sessions are as fond as mine. She surely has blocked out the Saturday morning volleyball serving lessons in preparation for the saturday afternoon grade school tilts.

This is an exciting time for her. She is finishing a very successful high school career. She was very active in extracurriculars such as dance team, environment club, chairing the fall fesival committee and student council, including serving as Senior class President this year. Her academics have been outstanding maintaing a GPA in the high 3's on a 4.0 scale, while taking a full slate of honors and college credit courses at a college prep academy with a great reputation. So yes, there is plenty to be proud of as we look forward to her next challenge at Purdue University in the fall.

Wow did I say Purdue University? That is over 250 miles away, I realize that she needs to feel some independence but 250 miles! In 102 days my little girl will be taking up residence in a town 4 hours away at a University that is 65% male populated.  I think I'd rather stroll back down memory lane, musing over father-daughter dances, trips to baskin robbins and second grade spelling tests.  It does seem like it all flew by way too fast. But thanks to unlimited texting and skype maybe it wont really seem like 250 miles. I know that she will continue her success, and doubt that she will be seeking my help on Organic Chemistry exams, but I hope she knows that I will "do my best" if she does. GO BOILERS!!