Do Not Settle for Shades of Gray

It is now officially that time of year when it is night time dark when I leave for work in the morning, and night time dark when I return home. This is also known as "Economic Disconnect Solar Deprivation Depression Season". At least football is on.

Cause It's too Late Baby, Now It's Too Late
While it may be hard to believe, there still exists a large proportion of financial observers that think more government regulation will both protect normal people and affect the behavior of the banking system. This line of thinking assumes two huge things:
-The banking system would accept any regulation that may hurt them
-The banking system will not side step such regulations
I would add there are plenty of regulations as is, but zero enforcement, so why not add another layer or two for show?

Today's example of wasting both time and my patience is the quickly passed credit card protection bill which may have been useful a while ago and if it had any teeth. Take a look:

House OKs expedited effective date for credit card rules
The House voted 331-92 to move up the effective date of recently approved restrictions on credit card companies from the current February, 2010, deadline of the law. The credit card law limits the ability of banks to hike interest rates and bans deceptive practices.

While I excerpted this piece one may notice that there are no clauses which will undo the already implemented rate hikes of around 20-30% for most large banking credit cards.

Many legislators were all proud of themselves for getting this done, thinking they have helped pressured consumers. Well, "Bzzzt. Sorry Hans, wrong guess. Would you like to go for Double Jeopardy where the scores can really change?"

Thanks to John McClane from Diehard for the quote inspiration.

Bloggers In Washington Follow Up
Checking over the blogger posts about the Treasury visit was a let down. Most did not really have much to say about the whole thing. The one exception was Kid Dynamite's World. I would point you there to read his tale, it has a bit more detail and interplay than the other summaries I have seen.

As an aside, the site itself is very good, and the author is a poker player! I have no idea how I missed that site, but I have added it to the blogroll so I can get caught up.

Political Arena
I try and stay away from politics here for all the usual reasons. I will venture in if the political has bearing on the financial, and that is the case tonight.

There were a number of elections last night, and quite a few incumbents got bounced. I will not recount the democrat/republican slant on things, as you all know I am anti-incumbent and very anti-anyone that voted for TARP/Housing Tax Credit I and II, etc whatever side they fall on.

What is important is that all the exit polls I saw rated the economy as their number one issue. Health care scored a distant 3rd or 4th place. Add to this that it is not only jobs that are a major driver for voters right now, but items like the deficit, bailout backlash, and anger over banking issues (obscene bonuses, high rates while banks borrow cheap) are really moving voters. In this perhaps there could be a chance for change. Economic Disconnect's slogan for the next election is:
"Vote, And Hope You Still Have Some Change Left in Your Pocket!"

Do Not Settle for Shades of Gray
In direct opposition to what may have been the signal sent in last night's election, the handouts and taxpayer leveraging continues unabated:
Congress Poised to Keep Homebuyers’ Tax Credit
I will not cover again the expansion program, by now you all know the deal.

It is known this program is wasteful, full of fraud, and a direct handout to the realty/banking lobby. The government insists upon doing wrong things in the hopes of having some kind of a good effect. this is where I am going to get a little philosophical, so bear with me.

It is not acceptable to do "wrong" things to end up with a "right" result. Now I am well aware in this day and age there is no "Black and White" but only shades of gray for most denizens of the planet. I reject this.

All efforts to "save" housing may be in good faith, but you cannot target and punish the majority to prop up the few. The major argument is "if this is not done, many more will suffer even worse" but that argument is empty. Things happen. Home prices go up, and they go down. Sometimes life is, gasp, rough. Lowering rates across the spectrum, adding all kinds of incentives to buy houses, and bailing out banks that lent money foolishly outweighs the benefit of a slightly more valuable home on face, and it is wrong in principle.

I will use one example couple, John and Jane, and apply the current actions of the government and how it affects them.

John and Jane are a young professional couple, recently married (2004), and looking to buy a home in 2005. After seeing open houses that looked like Walmart the Friday after Thanksgiving the couple slow down and look at things. They notice that home prices are not even affordable for them even thought they both make great money. They notice the houses they are looking at were selling for less than half of the 2006 prices in 2002. To top it off, a known high school drop out (but casual friend) from Johns old school was bidding on a home they were, and he has no job. Clearly something is wrong.

The couple do some study, and decide a crash is in the works. They decide to save money and wait for the price rocket to come down.

And it begins.

By 2008 the couple are seeing what they have waited years for: dropping prices. While putting off a home purchase and the possibility of having kids to wait things out, they now are inspired that their efforts will be rewarded.

And then the government steps in.

The lowering of rates kills the savings return the couple was seeing, even severely dropping their CD rates as well. The FED goes to 0%, just like Japan:


Next up, mortgage re-works for fools that bought too much house, effectively giving those irresponsible buyers a new lease on life in their home until they default again.

Tax credits have given low end buyers (where John and Jane are looking to enter) who now have renewed vigor to use the free money no down payment FHA program to get into homes they will default on anyway.

I could go on, but where exactly is John and Jane's bailout? How are they served by all these actions? In what way have they been helped?

For being prudent they have been assailed at all sides.

As an extreme example, consider this:
You could solve unemployment in one month. Have all the unemployment receivers go to the main office to pick their check. Load them all into cargo ships and drop them off in Antarctica. Say "Have at it" and leave them there.

Presto! Unemployment just went to zero in a month!

So I ask, is doing "wrong" to get a "right" still ok?

If you answered "No", and unless you are a Keynesian to whom people are numbers and lines on a chart so you may not really care, why are other "wrongs" ok?

Is it scale? Are we arguing semantics? What is the difference?

When you lose sight of "right and wrong" then all bets are off. The greater good is nice in theory, but usually the greater good in today's mess are the banks and their entrenched hold on politics.

Have a good night.