The SOB’s in the Senate are at it again. They have porked the you know what out of the emergency bailout package. I downloaded a copy and read through it tonight. I am absolutely shocked and ashamed of what I found. It is totally business as usual. Dozens and dozens of special interest appropriations. Page after page of items that have absolutely nothing to do with our financial crisis. Don’t get me wrong, some of these things are important, but DO NOT belong in this emergency package. Unfortunately, this bill would not pass without dangling the candy in front of our addicted public servants. It will be interesting and scary to see how much this 700 billion dollar bill will actually cost tax payers.

I copied the following straight from the draft bill:

• sec. 108. credit for steel industry fuel. (page 146)
• sec. 111. expansion and modification of advanced
  coal project investment credit. (page 154)
• sec. 211. transportation fringe benefit to bicycle
  commuters. (page 205)
• sec. 314. indian employment credit. (page 262)
• sec. 316. railroad track maintenance. (page 262)
• sec. 322. tax incentives for investment in the district of columbia. (page 262)
• sec. 325. extension and modification of duty suspension on wool products; wool research fund; wool duty refunds. (page 262)
• sec. 503. exemption from excise tax for certain
  wooden arrows designed for use by children (page 300)
• sec. 504. income averaging for amounts received in
  connection with the exxon valdez litigation. (page 301)
• sec. 506. modification of penalty on understatement
  of taxpayer’s liability by tax return preparer. (page 308)
• subtitle b—paul wellstone and pete domenici mental health
  parity and addiction equity act of 2008 (page 310)
• sec. 601. secure rural schools and community self
  determination program. (page 344)
• sec. 702. temporary tax relief for areas damaged
  by 2008 midwestern severe storms, tornados, and flooding. (page 394)

And the list goes on and on…….

Download a copy here

Last week I actually thought these bozos were going to do what’s right for the country and act quickly with integrity. So much for my dreams of grandeur. Hold on America, we’re in for a bumpy ride.

Here we go again. I promised myself I would not blog about the financial crisis again until there was some light at the end of the tunnel. Well, there is light, but it appears to be a freight train. I feel like the alarmist town crier, hustling newspapers with bad news. But unfortunately folks, we have had nothing but bad financial news lately.

Another One Bites the Dust

Last night, Washington Mutual was seized by government regulators and JP Morgan Chase agreed to buy the assets of the financial giant. Under the arrangement, Chase will pay the Federal Deposit Insurance Corporation (FDIC) 1.9 billion dollars and will acquire 307 billion in assets and 188 billion in deposits. This is the second major acquisition by Chase in the last six months, orchestrated by the government. In March, the government cut a deal in which Chase acquired Bear Stearn’s. WaMu’s failure marks the 13th bank to go under this year.

Congress To The Rescue

Maybe, just maybe, this will encourage Congress to stop bickering over the bailout plan and actually do something productive for a change. These guys and gals need to put aside their partisan objectives, special interest appropriations and get busy with an effective plan to steer us clear of the impending financial doom.

Everyone from Warren Buffet to Henry Paulson to Ben Bernanke seems to get it. Heck, even President Bush warned in his address to the nation that “Our entire economy is in danger”. Buffet reportedly urged Congress to act quickly and avoid an “economic Pearl Harbor”. Menacing words from the worlds greatest investor. It will be interesting to see if our elected officials heed that advice and work out an emergency package pronto.

One of the early sticking points has been the Bush administration refusing to place language in the package denying the executives of these failed companies from exercising their “golden parachutes” and collecting 10’s of millions of dollars in bonuses. WTF?!? Why would you pay anything to those responsible for bankrupting these companies and nearly causing the collapse of our entire economic system? Looks like a “no brain-er” to me. If anything, these jokers should have to pay back some of the monies already earned as restitution to the citizens who have lost their life savings, retirement plans and jobs, as a result of their misconduct. Can you imagine getting a big fat bonus at work for bankrupting your company? Of course not! These folks are sub-human excrement, found somewhere between pond scum and bottom sediment. Show no mercy!

What’s Another 2 Trillion?

As an average Joe, it makes me sick to my stomach to think we are going to spend 700 billion to bail out a bunch of irresponsible yahoos. 700 billion on top of the 800 billion already committed to Fannie, Freddie and the huge bailout of AIG. Most experts think this whole corporate welfare package will cost upwards of 2 trillion dollars. 2 FREAKIN trillion dollars. I guess we just add that to our 9.6 trillion dollar national debt and our 53 trillion of unfunded obligations. And where are we going to get this enormous sum? Why we will borrow it of course! It’s the American way. And who will we borrow it from? Probably the Chinese. You know, that giant communist country that couldn’t conquer the world militarily, but is doing a fine job of crushing us financially. So the next time someone asks “Who’s your daddy?”, just remember, it’s China baby!

How Did We Get Here and What Happens Next?

I don’t think anyone has an exact answer. Years of deregulating the banking system probably has not helped. If you leave the fox to tend to the chickens, he will slaughter the chicks. I am not for large scale government intervention in business. By no means. But when you have banks loaning hundreds of thousands dollars to anyone who can fog a mirror, regardless of ability to repay, perhaps some oversight is warranted. I am also not in favor of government bail outs of private sector business. That being said, I don’t think our economy can withstand the huge impact of all of these financial institutions failing. It looks like we don’t have a choice. We are almost definitely going to face hard economic times ahead. This government rescue package is no guarantee that we will advert recession or possibly worse, but it will probably soften the blow. Time will tell. If we manage to pull out of this, we will probably hear 10 years from now how close we came to a total economic collapse. And if we experience a total economic collapse, God help us.

So What Can You Do?

Quite honestly, not much as far as the crisis goes. It is in the hands of our trusted government and the balance of the financial giants left standing.

Personally, there are a few things I would recommend YOU start doing right away. Get your financial house in order. Reduce unnecessary spending. Put yourself on a budget. Start saving. Seriously.

For more information, check out these previous posts:

8 Steps to Recession Proof Your Finances

5 Ways to Recession Proof Your Job

5 Tips to Cut Your Grocery Bill Today

Also, here is a great post from my online blogging friend Mike over at LiveLife365:

How To Survive an Election Year Financial Meltdown

And finally, here is a great resource for getting you financial life in order:
The Total Money Makeover: A Proven Plan for Financial Fitness by Dave Ramsey

With the dizzying array of bad news in the financial world, it can sometimes be overwhelming. Over the past several months I have attempted to inform you of the events in an easy to understand, straight forward way. However, sometimes complex issues are better understood when explained from a personal perspective. I recently came across a blog post by Aldon Hayes of Orient Lodge. Aldon tells his very personal story in:

My Role in the Collapse of Lehman Brothers

Unfortunately, his story is not unique. It is happening all across our country. You may know someone who is or perhaps you are, in a similar situation. When reading his article, I felt like it put a human face to the numbers. I recommend checking it out, as it is a good read.

John

In what seems to have become common place, we had another weekend of nasty financial news. First up, the announcement by Lehman Brothers that it has filed for Chapter 11 bankruptcy. The 158 year old company was unable to work out a deal to be purchased. In a separate move, Bank of America agreed to purchase Merrill Lynch, saving it from a similar fate. Add these failures to the collapse of Bear Stearn’s and you have 3 of the 5 largest US investment banks failing in 2008. Not to mention the government bail out of Freddie Mac and Fannie Mae. And as if that were not enough, AIG the worlds largest insurance company, is asking the Federal Reserve for “emergency funding”.

Tough Road Ahead

Where do we go from here? Hard to say. We are definatley in uncharted waters. Or at least uncharted by todays CEO’s and government officials. Many financial experts agree that there will probably be more major financial institution carnage before its over. Former Federal Reserve Chairman Alan Greenspan agreed on Sunday and added “the government should not protect them all”. As painful as that will be, he’s probably right. Until we eradicate the cancers in our financial system, we cannot begin to heal it.

What’s That Mean?

Unfortunately for Joe consumer, all of this financial pain will equate to tougher lending standards and the inability for many to borrow money. To put a positive spin on things, this will keep some people who have no business borrowing, from doing so.

What do you think? Are we about through this 14 month credit crisis? Or we just getting warmed up? In either case, wake me up when this Nightmare on Wallstreet is over!

** A little good news **

Oil is trading below $100 per barrel today at about $96!!!

By now I’m sure you have heard about the latest unprecedented government move to take over Freddie Mac and Fannie Mae. Treasury Secretary Henry Paulson announced the news on Sunday. It is estimated that 50% of the 5.4 trillion in US mortgages are held by Freddie and Fannie. Many experts agree that they are too big and important to fail. So here we go again with another tax payer bail out.

What Our Government is Saying

• On Sunday, Treasury Secretary Henry Paulson said “Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe.”
• He went on to say “A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance.”
• President Bush chimed in with “Americans should be confident that the actions taken today will strengthen our ability to weather the housing correction and are critical to returning the economy to stronger sustained growth.”

What This Means To You and Me

• Interest Rates could drop by as much as 1%
• Could make it more affordable to purchase a home for those with good credit
• Could help some homeowners sell their homes
• Tighter lending standards, will make it harder to borrow for those with less than pristine credit
• Borrowers viewed as risky could pay more in fees
• Dividends will be cut to shareholders

The Skeleton in the Closet Nobody is Talking About

This government bailout will ultimately cost tax payers billions. Many experts say if the housing market does not turn around soon, it could cost tens of billions. Being that a bailout of this magnitude has never been done before, no one knows the real implications to our long term financial stability or how much it will actually cost “We the People”. If you checked out the documentary I.O.U.S.A. you know that any money the government spends is money we don’t have. We are borrowing against our future. The real burden of all these government bailouts will be placed on future taxpayers, our children and grandchildren. However, perhaps in this case we really don’t have any other choice.

What do you think? Is it a good idea for the government to completely take over and bail out these giant home lenders?

I went to see I.O.U.S.A the other night. The documentary was accompanied by a live panel of 5 including Warren Buffet. The show was simulcast live to over 400 theaters nation wide. What an eye opening experience. I left the theater shocked and wondering how we (The United States) are going to fix the many financial problems facing this country over the next several decades. I pride myself at being informed. I thought I had a fairly good understanding of our collective financial situation. Boy was I wrong. Our National Debt is out of control! Every American ought to watch this documentary.

I am not going to attempt to explain the details of what we are facing. However, I would like to point out a few statistics mentioned in the movie. For starters, as of today, we are 9.6 trillion dollars in debt. That’s $31,586.31 for every citizen in the country! However, this is just the tip of the iceberg. The total sum of all of our unfunded obligations, Social Security, Medicare, Medicaid and our National Debt is an astonishing $53,000,000,000,000 (53 Trillion dollars). That equals a mind blowing $175,000 for every American according to the Peter G Peterson Foundation. Crazy. Freak-in crazy!

I was especially impressed with David Walker, former Comptroller General of the United States under Presidents’ Reagan, Bush and Clinton. He did an excellent job of explaining the problem in terms everyone can relate to. He resigned his government position to join the Peter G. Peterson Foundation as the President and Chief Executive Officer to focus on helping the public become aware of this enormous problem.

This was a real wake up call. I am very concerned about the immense debt load we are leaving our children and grandchildren. If the situation is not addressed future generations will undoubtedly be faced with a much lower standard of living than we Americans have come accustomed.

I highly recommend you check this out. It is opening in theaters across the country on August 22, 2008. It is an unbiased, nonpartisan look at one of the biggest problems facing our nation. It will be played at both the Republican and Democratic conventions. It is timely and informative. Find a theater and be prepared to be shocked!

Did you catch the live performance? Have you seen the movie? What did you think?

If you want to learn more, visit http://www.pgpf.org/ and http://www.agorafinancial.com/iousa.html

Manufacturers Display Their Magical Powers

There is something underway you should know about. Even as I speak thousands of consumer products are shrinking, right before our very eyes. That’s right, manufacturers are reducing the sizes of everything from bags of dog food to boxes of cereal and cartons of ice cream. Can you say back door price increase? Inflation?

Less is better right?

While the mainstream media reports less product for the same price, I have noticed something different. Most everything I purchase has gone up in price, if only by a few cents. Sale prices have not been anywhere near what they used to be. So, I would say “Less for More”. If you are already aware of this, good for you! You’re a savvy shopper! If not, take a look next time you’re at the grocery store. Ice Cream for instance has shrunk from 54oz to 46oz. That’s almost 15% less creamy goodness for little Johnny. Some manufacturer’s are trying to pass off the size reduction as a health benefit, as in “New Smart Size”. Face it folks, it not about your waist, it’s about your purse.

Soon you may have to buy ten boxes of Super Duper Flakes to make one bowl of cereal!

Note: There is a poll embedded within this post, please visit the site to participate in this post’s poll.

What Can You Do About It?

Here are a few ideas to help ease the pain:

• Shop sale ads
• Buy sale items in bulk
• Use manufacturers coupons
• Buy store brands
• Eat less (I’m kidding, sort of)
• Write your congressman (Again joking, they don’t seem to be able to relate to what’s going on in the real world from behind the tinted windows of their bullet proof, fuel-hog SUV’s.)

For more detailed tips on saving on your grocery bill, check out:
5 Tips To Cut Your Grocery Bill Today!

And now would be a great time to work on your personal finances:
8 Steps To Recession Proof Your Finances

Please check out these posts and feel free to offer other money saving ideas that you may have!

In Conclusion

There are many reasons for this latest round of product shrinkage. Commodities such as eggs are up 46%, corn is up nearly 70% and wheat is up an amazing 96% over the last year. Fuel has almost doubled. These are all major factors contributing to our ever decreasing purchasing power. I get it. I understand the manufacturers have to re-coupe the cost of the higher raw materials and fuel. But where I have a problem is the way in which they are passing on the increase to consumers. Quietly. Inconspicuously. I would almost prefer to see the price increase. Almost. Unfortunately, I think we will see more of both. What do you think?

I went camping this past weekend and noticed a significant jump in gasoline prices. I paid $3.89 per gallon, for the first time ever. It was $3.69 just last week. I see $4.00 per gallon in the very near future. And unfortunately I think we may see $5.00 per gallon this summer. Long term it could go much higher.

This obviously will cause prices of everything from food to laundry detergent to go up (even more). I am wondering what effect higher gas prices will have on you and your family? Will this cause you to change or even cancel your vacation plans? What do you think about the ever increasing gas prices? Vote in the poll and leave a comment! I would really like to hear what you think.

Note: There is a poll embedded within this post, please visit the site to participate in this post’s poll.

Food For Thought

• Diesel fuel in England just hit £1.28 ($2.52) a liter or $11.50 per gallon
• Price of a gallon of gas in the Netherlands: $6.48
• Price of a gallon of gas in the Saudi Arabia: .91
• Rockefeller family has challenged ExxonMobil to focus more on renewable energy

Find some ways to save on gas:
8 Steps To Reduce Your Gasoline Bill

Find the best gas prices in the US & Canada:
http://www.gasbuddy.com/

There have been so many mixed signals about the state of the US economy lately. One day a pile of negative reports is released followed by a couple of positive ones the next. I do not like being an alarmist. I am not a negative person by nature. In fact, I try to maintain a positive outlook. That being said, I also don’t believe in slapping lip stick on a pig.

I am not an economist. As I have stated before, I do read a lot and pay close attention to what’s going on around me. For some time now, it sure seems as though the negatives are out weighing the positives as far as the economy is concerned. Here are several key points that have been on my mind lately:

• Oil hit an all time high today of $135.09 a barrel, before falling slightly.
• Gas prices are approaching $4.00 per gallon.
• Annual inflation is running at 6.5 percent, excluding food and energy.
• Eggs, milk and wheat prices are up more than 30% this year.
• There is a world wide rice shortage, yes I said rice shortage.
• The housing market is in turmoil, with prices in some markets down 20%
• The sub prime mortgage fiasco continues
• Personal bankruptcy filings were up 28% in January compared to a year ago.
• Mortgage foreclosures surpassed 200 billion dollars in 2007.

I am not telling you all this to get you depressed or worse, for you tune out and shut down. I think it is important to understand what is happening to our economy. In order for you to make wise financial decisions for your family, you need to be aware of what is going on.

The question of whether or not we are in a recession keeps rearing it’s ugly head. I have read several economist opinions that have stated we are indeed in a recession. However yesterday, the government released a key economic indicator that says we are not in a recession.

Here is my take:

We are in a recession. It is just getting underway. It will get much worse before it gets better.

Why do I think this?

The two previous US recessions 1990-91 and 2001 were very short lived. Many believe this was because consumer spending held up. Put simply, people kept buying and buying and buying. This time around, most consumers are strapped with huge amounts of debt. Because of the housing crisis, most people cannot tap any more home equity. Because of the rising cost of gas and food (and just about everything else) most people have much less disposable income. These three facts combined will make it extremely difficult for the US consumers to bail us out of this economic downturn.

What Next?

So what should I do, you may be asking. I would say, expect the best, prepare for the worst. I am not suggesting locking yourself away and becoming a penny pinching miser. No! Or No! Not unless you want to! As I have stated before, I would recommend the following:

1. Do not enter into any new long term debt, right now.
2. Try to pay down any high interest debt, such as credit cards.
3. Look for ways to trim your expenses.
4. And if at all possible, start putting away some money in savings.

Conclusion

It remains to be seen whether we are really in a recession. And things could change tomorrow. But even if things do continue to get worse, you will be in a much better position to deal with it if you educate yourself about the basics of our economy and take some steps to tighten up your personal finances.

Misc Info:

Goldman Sachs predicted this month that oil could spike to $200 a barrel

About Housing:
“This year and next are going to be tough as home prices find bottom…
The housing market is in its most severe slump since the Depression, a crisis which we’re likely to be about halfway through right now.”

- Fannie Mae’s president and CEO, Daniel Mudd

Having trouble building a savings account? Can’t seem to make yourself put any money into savings? Many of us have experienced this problem. What I have found truly works is to make your savings automatic. This takes the emotional decision making out of your hands. It assures you will begin building something for an emergency, rainy day or your future retirement dreams. Whatever the reason you have for wanting to save, start today!

It is very easy today to set up an automatic savings plan. If your place of employment offers a 401k or the like, I highly recommend signing up. Not only will your savings be deducted automatically from your paycheck, but it will be taken out tax free. And many employers offer matching funds to your contributions, free money! Also, many employers can electronically transfer funds to your savings or brokerage account. Initiating savings at the paycheck level is in my opinion the best way to do it. It leaves you no opportunity to change your mind and use the money for something else. Unless of course you decide you just can’t live without that new $200.00 widget and withdraw the money from your account. Self control is a topic best left for another post! In all seriousness, you will need to think about how much money you can actually afford to put away in a retirement account. If you need the money and withdraw it, you will owe Uncle Sam the taxes, based on your rate, plus a ten percent penalty for early withdrawal. For those just starting out, it is probably best to build an emergency fund first. This can take a while to do and is usually 3-6 months worth of living expenses.

It is also possible to have automatic transfers made from your bank account to another savings or IRA retirement account. I would recommend setting up a separate savings account specifically for your “do not touch” money. You can have money automatically transfered from your regular checking and savings accounts every week or month to this account. I have an on line bank account at ING Direct, known as Orange Savings for this purpose. There are several advantages to opening an online account. First they have notoriously low or no fees. That’s a plus! Second, online banks typically pay a much higher interest rate than your neighborhood brick and mortar bank. Sorry Mr. Local Banker! And third and possibly most important, it is harder to get at your money, increasing the probability you will save.

So, that pretty much sums up putting your savings on autopilot. Of course if you don’t take the first step and set things up, nothing will happen and five years from now you will still not have any savings. You have to start somewhere. Start putting away something, anything, no matter how small and insignificant you think it is. It will begin to add up, interest will compound and a few years from now you will be very pleased with yourself for listening to me. Haha. I hear friends talking all the time about not having enough money to save anything. Of course they’re telling me this between bites of Crispy Creme donuts and swigs of Starbucks coffee. Go figure.