Here is a video that has made its way around the internet. Just another example of how taxpayers are being screwed over. Also, this shows why the government does not belong in the private markets as they will be taken advantage of by those in the know.

The State of Maryland is offering mortgage incentives for folks whose jobs are relocating to Maryland due to the Base Realignment and Closures (BRAC). The theory is to get people who might rent or commute from Northern Virginia to buy in Maryland. Like most government programs, it sounds good in theory, but it makes no sense in reality.

Just like the $8,000 home tax credit offered by the federal government recently, there is no proof that this program isn’t a handout to folks who were going to buy anyway. The vast majority of the federal programs incentive went to people who were planning to buy anyway. The incentive may have pulled demand forward, but it did not create any demand.

The government has no means to determine if this is just an extra tax break for someone with a job. If they worked like a business, they might do some real data analysis. They could wait until the BRAC employee has either started renting or remained in an outside region to Maryland such as Delaware or Northern Virginia. Then they could target these folks with direct mail to entice a home purchase. This way the credit would be used as it is suppose to be, not as wasted money for someone who was planning to buy anyway.

Second, Maryland has a $10 Billion shortfall. Why would they give money away for a program that has no clear parameters if it is successful? Sure, they want the transfer taxes, which are hefty in the state, but the state needs to be cutting unnecessary expenses.

Third, the program hurts non-BRAC potential buyers. Lower rates may spur some demand, which could increase home prices (in theory). This hurts non-BRAC folks buying at higher mortgage rates, which could prevent them from buying. So for every BRAC purchase, a normal purchase could fall through.

It just amazes me how these idiots with no business experience come up with hairbrain ideas and then pat themselves on the back. In the business world, these jacknuts would get fired for wasting money.

In a disappointing vote, the Senate shot down the Vitters Amendment that would have required an annual audit of the Federal Reserve. Instead the Senate approved Bernie Sanders amendment, which gives Congress a one-time audit. The Fed should have no problem fudging the books to pass that audit. It would be decidedly more difficult to manipulate their books on an on-going basis. This vote is another example that the banking industry runs the show in DC.

Sanders sold out in this measure. He was supposedly pushing the same legislation the the Paul-Grayson bill in the House. I can go on and on about why we should audit the Fed. I am against a small cartel of men and women who sit behind closed doors and have the ability to affect the economy with no recourse. This is a component of central planning, not free markets. If you want a good example of why we need to audit the Fed, check out the video by Congressman Grayson of Florida (tip of the hat to Mish).

As we have all come to expect from our elected “leaders”, we are now finding out that many of them have been using inside information to place trades in their personal investment accounts. Now, insider trading is illegal for you and me, but it is certainly acceptable for our elected “leaders”.

Here is a good video describing some of the trading activities of our elected “leaders.” Most of the trades are hidden inside blind trusts, but isn’t it ironic that as Congress shamed short selling and derivatives during the market downturn that they were using these very instruments to bet against the American economy. From the Wall Street Journal,

Even a cynic can find Washington’s hypocrisy shocking at times. The Wall Street Journal reports today a House bill that would force lawmakers to make greater disclosures on financial transactions and disallow them from trading on nonpublic information is going nowhere fast.

That’s right. Members of Congress are currently allowed to profit on insider trading!

The bill, which has been languishing in the House for four years, would require elected officials “to make their financial transactions public within 90 days of a purchase or sale” and “prohibit lawmakers from trading in financial markets based on nonpublic information they learn on the job,” the WSJ reports.

It seems they’re above the transparency they’ve been calling for on Wall Street.

It is high time we let our elected “leaders” know that we aren’t putting up with this any longer. Vote out all incumbents this fall. All of them.

Great skit from SNL last night. What is so scary is this probably isn’t far from the truth. It use to be government workers received lower pay in return for a pension and guaranteed employment. Now, they have phenomenal pay while maintaining their rock solid employment. However, as this crisis unfolds, I think we will start to see the American public revolt against this inequity.  As far as unions, they were necessary in the 1920s, but they are now a cancer on the American economy. I do believe that workers should have a right to negotiate with employers. However, this can be done by electing one or two employees to speak for the group during negotiations. Once the negotiation is done, then all should go back to work. Unions fleece employees to fill their own pockets. Nothing more.

I took a quick review of the benefits for working at the Securities and Exchange Commission (SEC). I saw the usual benies like medical, pension, tax deferred savings vehicle, two weeks vacation, yada, yada. However, I failed to see this benefit – unlimited porn (hat tip: CaleintheKeys). It appears that many at the SEC weren’t as worried about catching bad guys as they were about watching porn.

“During the past five years, the SEC OIG (Office of Inspector General) substantiated that 33 SEC employees and or contractors violated Commission rules and policies, as well as the government-wide Standards of Ethical Conduct, by viewing pornographic, sexually explicit or sexually suggestive images using government computer resources and official time,” said a summary of the investigation by the inspector general’s office.

More than half of the workers made between $99,000 and $223,000. All the cases took place over the past five years.

The article profiles one attorney who downloaded so much porn that he used up the entire hard drive on his government issued computer that he had to start storing porn on CDs and DVDs that were scattered all over his office.

I really don’t think any additional statement is necessary.

Apparently, the government is at it again with housing. Considering the $75 Billion dollar HAMP plan that the government set up for housing has been an abysmal bust, the gubment now wants to forgive loan balances for underwater homeowners. They are going to use $14 Billion of the repaid TARP funds to pay for this.

The first key element is that the government will provide financial incentives to lenders that cut the balance of a borrower’s mortgage. Banks and other lenders will be asked to reduce the principal owed on a loan if the amount is 15 percent more than their home is worth. The reduced amount would be set aside and forgiven by the lender over three years, as long as the homeowner remained current on the loan.

Until recently, administration officials had been reluctant to encourage lenders to cut the principal balance, worrying that this would encourage borrowers to become delinquent. But as federal regulators have struggled to make an impact on the foreclosure crisis, those qualms have weakened.

Twenty five percent of loans are underwater right now. If the government forgives a portion of this loan balance, do they honestly think that people won’t intentionally default in order to get the principal writedown. This is a total act of desperation. Now, they want the taxpayer to fund this silly program.

Even worse, the government is looking to the FHA to cover these programs. FHA is facing enormous financial constraints right now.

the administration is increasingly turning to the Federal Housing Administration to help underwater borrowers who are still keeping up their payments. The aim is to help these borrowers refinance into a more affordable loan. The FHA will offer incentives to lenders that reduce the amount borrowers owe on their primary mortgages by at least 10 percent.For those borrowers who have more than one mortgage on their house, the FHA will allow refinancing of the first loan only. The new loan and any second mortgage could not exceed 15 percent of the home’s value. This approach is meant to benefit not only borrowers but also lenders by allowing them to offload mortgages that might otherwise fail.

Just let the markets work. I feel for people who bought too much house, but they simply cannot afford the home they own. This will just be another waste of taxpayer dollars and motivate others to become delinquent. When you let markets work, even if it is through foreclosures, everyone benefits. Realtors, home repair folks, mortgage bankers and others become gainfully employed, and the markets start to normalize.

I don’t want to get into debating the recent health care bill. Frankly, I am sick of it. It has been an exercise of watching Dumb and Dumber in an argument without any humor. However, I do want to point out my big sticking point to the plan: costs. The Republican portion of the Joint Economic Committee were able to quantify how the government severely underestimates costs for medical programs. This happens for every area of the government, but it has bigger consequences for health care when you consider the government has almost $40,000,000,000,000 in unfunded medical bill already. That obscenely big number with all the zeros is $40 Trillion.  As a point of reference, our entire federal debt along with the value of all the stocks on the New York Stock Exchange is only $36 Trillion.

Also, a note on the recently passed Massachusetts health care bill. It is already exceeding cost predictions, and it would be worse if not for the direct federal subsidy that found its way to Springfield (the capital of Mass., not Homer Simpsons hometown). Even the Democratic Treasurer for the State of Massachusetts was against the bill because of cost escalation. Tim Cahill claims the economic costs for the Mass. plan would be higher except the Federal government was propping up the plan to ensure passage of the national plan.

Tip of the hat to Reason Magazine.

Again, I don’t want to get political here, but the costs of this plan will be substantially higher than projected. The government’s record on this is very clear and consistent.

Great article about how FINRA is making a power grab to regulate registered investment advisors along with their current oversight of brokers. I have discussed the difference between investment advisors and brokers as well as how the former is regulated by the State or SEC while the latter is regulated by FINRA (see here and here for the whole picture).

As the articles discusses, FINRA, which is a self-regulator organization (SRO), claims that they would do a much better job of regulating financial planners who act as a fiduciary than the SEC and States can do. FINRA points to Uncle Bernie (Madoff) as an example of the SEC’s inability to properly regulate. Fortunately, the Barron’s article points out how FINRA, which oversees not only brokers but the broker-dealer (custodian of client’s assets), failed with Uncle Bernie too. It also notes how FINRA has an enormous conflict of interest in outing bad practices since they are run by the very brokers they are supposedly monitoring. Imagine having inmates guard over other inmates.

What the article doesn’t discuss is the core reason why FINRA wants to regulate independent, fiduciary investment advisors. They want us to fail. The executives at the big wirehouses have been losing clients to independent advisors for years now. We have become a real nuisance to their conflict ridden sales system. Clients can get objective advice from registered investment advisors, and this fiduciary standard doesn’t fit well in a world where moving product is the goal. If FINRA can regulate the small guys, they can drown us in useless paperwork that does not serve the client’s needs. The more time we spend on paperwork the less time we spend getting the word out. This ensures the big houses with their multi-million dollar marketing budget can drown us out.

If you are going to swim upstream to wealth, you need to work with a planner who has a legal obligation to put your interests first. You should also let Chris Dodd and Barney Frank know that you want the fiduciary requirement on anyone providing financial advice or selling financial products and to keep FINRA out of the way.

When I worked at Coast Guard headquarters years ago, I always heard from the civilian employees how they could make so much more in the private sector. They would make these claims as proof that they are “sacrificing” for the good of the nation. I would just pat them on the back and thank them for their service, rather than reminding them that in the private sector they would also lose their juicy benefits (including the pension plan), work much more than the 40 hours they work for the government, face downsizing (as opposed to only losing their job due to murder or embezzlement), and be accountable for their work (in the government failure results in the agency receiving more money, not failure like the private sector).

It turns out that government workers get paid substantially more than private sector workers, especially when benefits are factored into the equation. The USA Today published an article that showed that federal workers are paid 20% more than the private sector in 8 out of 10 specialties. The average government worker made $67,691 compared to $60,046 for the private sector employee according to the article. Government benefits increased this pay discrepancy substantially as the average government worker received $40,785 in benefits whereas the private sector employee only experience $9,778 in benefits.

Yet, the federal employee unions continue to claim that federal employees are underpaid by 26% relative to the private sector. I think this is the usual union reindeer games that they play, but here is a link to some of their data.I don’t doubt that the top level government executives, known as the SES or Senior Executive Services, are paid less than the executives at Fortune 500 companies, but at all other levels I don’t think this exists. Government workers have much better pay and benefits without the risk of losing their jobs like private sector employees. It would be like a CD yielding more than the stock market consistently. This isn’t how it should be. The safer job should pay substantially less since risk is reduced.

Even more pressing is how many of the municipalities have mismanaged their pension funds. States are facing huge shortfalls in their pension funding. If you want to understand how big this issue is, please check out Mike Shedlock’s blog at Mish’s Global Economic Trend Anaylsis. He covers it well. This is going to be a big issue when the governments ask the private sector employees to pay extra in taxes to fund a pension for someone who makes more money with greater job security.  Look for a backlash in the ensuing years as this discrepancy grows.