The Mortgage Crisis

Finals are coming up so I obviously want to do anything but read for class and prepare for exams. Here is distraction number one for right now. THE MORTGAGE CRISIS, people disagree on how to solve it but most agree the problems in our economy are largely connected to homeowners being upside down. A good number might also agree that we are going to continue to see the problem until we do something about it. I have my own thoughts ... which I am of course going to share now... call it a solution but lucky for some I guess I am not in office and therefore I am not the one making the call.

A brief note on how this I think this mess got started, I think would shed some light on my thoughts and solutions. In the early 2000's prices went up year after year and people kept buying. Prices were going gangbusters and no one regulated anything. Everyone enjoyed the ride. It is not an exaggeration to say that mortgages were issued based on appraisals that were overvalued, income figures that were erroneous, sometimes made up, that the" professionals" were in on it. They were getting rich doing it. (Insert loan officer and CEO figures) What do I mean by professionals, the appraisers, loan officers, banks, loan companies, mortgage security bundlers, underwriters, rating agencies, and on and on... These were the "professionals" which to me means, they were the ones that were responsible for making sure things made sense. Let's issue a mortgage to a couple making 50,000 combined for a property appraised at $625000 based on whatever comps we can find, then lets bundle a whole lot of these mortgages together, bundle them, get Moody's to give them a AAA rating and sell it off to investors. Let me clear I am exagerating, but really am I. The picture was a little more complicated obviously to add to this mess the banks were betting on each other's obligations buying insurance from each other.

AIG was of course one of the largest holders of these "insurance" obligations and when some of the people came knocking it quickly became obvious nobody had thought about the risk that people would not pay. The "professionals" were making money hand over fist and were asleep at the wheel. So what did we do, what most agreed was the sensible thing to do, we bailed out the institutions. Sorry I know it may have seemed like I would opt for the banks just dealing with it on their own, but the risk was systemic and global. So I agree the bailout needed to happen.
What now... there are millions of homeowners who are upside down, and facing foreclosure. It's simple the "professionals" messed up they weren't doing their jobs they deserve to be punished. The industry must be forced to take write downs on mortgages that are upside down, and so it's fair they should have to do it whether the homeowner is struggling or not... period. They were all complicit they all suffer. What about homeowners that already own their homes outright, yeah they don't get anything concrete, but a stable housing market would be the best thing that ever happened to them. Now comes the dirty word MORAL HAZARD, we are rewarding people that took on more than they could afford... you know you are dam right we are.

You know what is a moral hazard? The shit these guys were doing... lest we forget about what I think led to this and they were on their knees begging for a bailout no bank executives seemed to say anything about Moral Hazard then. They were all going to fail, disappear, someone needs to remind them that they are lucky they exist at all. Yeah right downs would likely decimate some of them and shrink the size of a whole lot of others... well that's the free market at work we don't pick winners and losers. Write offs are the right thing to do and the best way to avoid MORAL HAZARD's in the future. Banking will shrink but those people that got write downs will start spending and other industries will recover. By choosing Banks we are picking winners and losers... The idea so many people are so vehemently against.

NBA Lockout

Rather than write a whole long rant here are some points.

• The past CBA was a 57/43 split. The players are now offering a 52/48 split, so they are willing to take a pay cut.
• I have heard a lot about the whiny players... they are just negotiating for what they think is fair... again they are making an offer that is lower than the starting point... the current CBA
• Does David Stern seem like he has lost his mind?
• The owners own these franchises ... why don't they seem to be afraid of the brand losing value
• My opinion is that fans are to blame... we make the owners rich by buying tickets and watching the sport...
• A new movement needs to be started... boycott of games once a deal is made. For every game that gets cancelled due to lockout, fans will boycott two games after the season begins.

Hoping this will start some ranting from others... What are you guy's thoughts?

Election 2010

Disappointed... Happy... for better or worse the elections were yesterday... Time to congratulate the winners, console the losers and start working for a better tomorrow.

I graduated from college in 2001 and before graduation I was already working for a State Assembly member. That was the year that 9/11 happened… it seems to me that we have become more divided in our views, more charged in our political attacks, more unwilling to work with each other from that point on. We were on the same page for a few years, a unified front but soon that unity faded.

I am not saying we all have to agree. Anyone that knows me or has read any of my past posts knows I have pretty strong opinions. Discourse is important because it helps us arrive to better solutions, but there in lies the crux we need to arrive at solutions. They are not all going to be perfect… I don’t think any of us have all the answers but we have to work towards some sort of progress. I myself have to heed my own advice.

Two more things. Politicians are not saints, and I don’t expect them to be. They have to be negotiators, fighters, smart, and aggressive. If we had a bunch of “Tibetan” Monks running the place I am not sure any hard decisions would ever be made. There are no right answers in many cases just different approaches. The second point is that we have to be patient enough to let these approaches bear fruit. I may not like the results of the election but throwing up road blocks to ensure the other side fails is not going to get us anywhere…

Why are the Republicans in such an uproar? (Just take a vacation perhaps "Costa Rica")

Just a thought if Barack Obama doesn't do anything else for the rest of his presidency he will already have done tons more than the last person who had the job. Last I checked since he took over the stock market has improved, he has worked on the torture issue, vowed to close Guantanamo, worked on passing historic Health Care legislation, worked on withdrawing from Iraq, oh and he won a Nobel Prize along the way. I think its about time the President took a vacation, I mean the last President only took more than any other President in the history of our country. But in his defense nothing was going on... oh wait...

Lets take a look shall we... A full blown terrorist attack on our soil, Katrina, two wars, Valerie Plame, "Mission Accomplished, Full financial meltdown, TARP (yes it was first passed under Bush), No child left behind, oh and of course Abu Ghraib, Guantanamo, water boarding, etc... Under Clinton we had a surplus after a Republican administration we managed to have the largest deficit ever... hmm definitely sounds fiscally responsible, yeah his vacations were definitely justified.

You would think with their track record they would learn to just be quiet for a little bit. It's like the kid in class that failed every subject but just can't seem to understand why people don't think he is smart. I am all for open discussion and discourse but when the talking heads of your party are Glenn Beck, Rush Limbaugh, Sean Hannity and the others at FOX News it makes you wonder.(these guys all love the last guy) To top that we always have Dick Cheney, Sarah Palin, and Dan Quayle... you mean to tell me this is who America wants to lead our government if something happens to the President... you had your chanced you failed, pipe down and chill for a while you are used to vacations anyways...

Educational Reform in California

*** Let me preface this by saying these are just my opinions, rants, etc... proceed with caution***

Some of you know this and others don't. I work as a financial planner and a majority of my clients are teachers. In fact I am currently sitting in the lounge of an elementary school in Santa Ana. Let me start by saying I am not even sure that we can call the current educational system in California a system. There are way too many things wrong with it. I don't want to seem like I am just here to complain but I think to get a fair understanding I should first lay out what I think are the issues with the system.

1. Mediocrity is rewarded
2. No accountability standards (testing every five days doesn't count)
3. Teaching to a test and not to the student
4. Poor recruitment
5. Watered down recruitment standards
6. Horrible budgeting
7. Lack of innovative thinking and solutions

I could go on with a few more things but I am sure you get the picture. The system is broken in a lot of different places. Now as an outsider let me say that I think the fault lies everywhere. The Unions protect their constituency, the teachers and administrators, the legislators protect their constituency, their election campaign fund, and the parents and children, well there is really no one to protect them. Here are some of the things I would do.

I am going to combine points 1 thru 3 because I feel the solution to these is the most important and I believe my suggestion tackles all three issues. The main key is the need for accountability and the fact that mediocrity should not be rewarded. We harp on our kids constantly that mediocrity in the real world is not rewarded but from my own experience I can tell you that at least 25 -30 % of the teachers I run into are rewarded for just that, mediocrity. Testing is currently the only way that we hold teachers accountable if at all and how we gauge progress in kids. It doesn't work. Remember that kid that was good at all the tests, could ace any of them, was he/she a great student? Remember the other kid that labored, studied hard, did all the homework but struggled with tests, was he/she a bad student?

In my opinion teachers should be held accountable by three constituencies, their peers, the student's parents, and their principal or administrators. At the end of the year each of these three parties should get to fill out surveys in reference to the teacher with the surveys being weighed 33% for both the admin and peers, and 34% for the parents. The teacher portion of this survey would break down as such, surveys by teachers in your grade level and by teachers in the grade level above you, since they can gauge your progress from the previous year. Teachers that teach the 12th grade would be gauged by how many kids they graduate. If a teacher does not get the appropriate marks they would be put on probation for the next two years. Why two you ask, no teacher should be fearful to teach in the manner she chooses, or punished for having a "bad class". The Union would be put on notice as well and they would have two years to make sure they took the opportunity to help their constituent, the teacher. Teachers that end up on the list more than twice would be subject to a one year probation. Again the union would obviously be notified. That would I believe at least start to resolve the first three issues.

Now comes the poor recruitment and the low recruitment standards. Teachers should be the bright of the bright and I am sorry in a lot of schools I go to they are not. A masters degree from University of Phoenix carries the same weight as a degree from Harvard. A masters degree in English Literature, Nuclear Physics, or Education are all of the same value. The government has a similar system of rewarding for units but I am not sure it should be that flat. There has to be some form of subjectivity to the units and degrees people attain when it comes to their pay.

Ever asked a teacher if they get paid enough? Let me know if you find one that thinks they do. Now realistically for the stuff they deal with they probably don't, but neither do a lot of other people in the world. I worked in the restaurant industry for a while at a Farmer Boys, I would challenge anyone to be a lead cook at a fast food restaurant like that and do well. I definitely couldn't hang and those guys get paid 10 - 14 dollars an hour. Now lets take a look at a teachers pay.( I am taking my numbers from the SAUSD pay schedule) A starting teacher with a bachelors degree makes $48000 a year. Lets take a closer look at this number. Teachers get about 12 weeks off a year which is about 10 weeks more than most people. So most people work 50 weeks a year while teachers work 40. So per week a teacher makes $1200. So on an annual basis teachers make $60000 ($1200 * 50) Go offer a college kid a job that pays him $60000 a year and see how many of them balk at that, even out of good institutions. So why can't we recruit people from better schools. In my opinion its simple; no one understands what teachers make or how they make it. Teachers in Santa Ana get paid $60000 on an annual basis, on top of that they get a pension, ten percent of which is funded for them. They have excellent health benefits to which the district contributes pretty healthily. There needs to be a marketing campaign that lets people know what the true salary packages of teachers are worth. One this would help recruit better teachers, and two teachers themselves would get a better understanding of where they stand in comparison to other professions. Without actually changing anything we would make teaching seem like a good choice.

Now for the budgeting issues, not much to be done there. The districts just have to be forced to run on a ten year average. What I mean by that is districts should look at what they have received in funding over the last ten years. In any year that they have a surplus over that average they should be forced to save a significant portion of that in a rainy day fund. In years that they are below the shortfall can be covered by that fund.

This last problem is a problem with the system. We need to let teachers be creative and teach to the needs of the class in front of them. By force feeding formulaic teaching ciricullums to teachers we are taking away the whole point of having them, to teach. I agree that schools need to teach similar stuff so kids are on the same level, but lets be realistic kids are not on the same level. No two classes are the same and teachers should be able to shift according to the class in front of them.

Ok this has been a very long rant, and if any of you have gotten to this point I congratulate you. I am not sure I would have made it. These are some rudimentary suggestions and obviously I am an outsider looking in but I hope at least some of my points make sense.

Inside our President's mind, maybe?

Nobel Peace Prize

President Barack Hussein Obama won the Nobel Peace Prize today. Am I surprised and shocked? Definitely. Do I think he is deserving of the prize well that is where the real question arises. In my own opinion he does. In my lifetime I can't remember another person that has been able to affect the spirit of so many people as President Obama has. He is not Mahatma Gandhi who by the way never won the prize and definitely deserved it. I would ask you though for a second to think of another person who has so instantly changed the perception of America worldwide. I would ask you to think of another person that has captured the imagination of the world as the President has. I agree with a lot of the critics that he has not been able to deliver on that promise but we haven't really given him much time. I don't remember us judging any other president with a microscope to such a degree as we have President Obama. Every move he makes is scrutinized and challenged, but yet how many times have we heard him loose his cool, say the wrong thing, give a shoulder massage to a foreign dignitary (thanks President Bush), or seemingly loose sight of his goal. To get someone to have hope in change, to actually have them believe in it is to me a great feat and President Obama has gotten a nation to believe and some may argue even a large segment of the population of the world...