The Economy Guy

Gold and the Dollar went sideways.

Oil and gasoline started upwards a little today.

Two more banks went under last Friday – 1st National Bank of Nevada (with 25 branches) and First Heritage Bank (with 3 branches in So Cal).  These two banks were owned by Scottsdale based First National Bank Holdings.  The two banks are being taken over by Mutual of Omaha today with the “full amount of deposits available to all depositors.”  The good news is that the FDIC is making the takeover very smooth compared to the Great Depression era when banks were closed for days at a time before re-opening.  Get used to these announcements – they’re going to start coming hot and heavy now.  Drip, drip, drip…..

Gasoline prices are coming down, by 2 cents (WOW) – BUT wholesale prices dropped over 40 cents, so who’s making the difference?  My son predicts that gasoline prices will be down significantly by late October to influence the election.  Food for thought.

Banks stated they “didn’t say” they needed to sell shares to raise their capital.  This helped push bank share prices up, and in my opinion this is part of the SEC conspiracy to help banks raise their share price via the “No naked shorts edict.”  Watch for a meltdown of bank share prices when the “edict” evaporates in a couple of weeks.

Here is what’s in the bill:
1. There is $3.9B grants (that’s FREE MONEY GRANTS) to help neighborhoods buy and fix-up foreclosed properties.  Think about the motivation for banks to foreclose until the cows come home in order to get some of the GRANT money.
2. There is money for 400,000 home owners to get FHA affordable mortgages.  This is aimed at home owners who find themselves in a “negative equity” position – or when the house is worth less than the mortgage value.  For this bill to work, banks must take a loss on the current mortgage, the home owner must qualify for the new loan, and the mortgage can be as much as 15% greater than the median price of homes in the area.  Does anyone see any pitfalls in this scheme besides me?
3. The Treasury can loan more money to Fannie/Freddie AND can purchase shares in those companies until the end of 2009.  So, given the big hoopla that the Treasury PROBABLY won’t have to use this facility, the Treasury will wait several months, and then use it – unless a new crisis forces them to move quicker.
4. First time home buyers will be getting $7500 TAX CREDIT (free money) for purchasing a house between 4/9/08 to 7/1/09.  This should do more than the other schemes to move buyers off the sideline and into the market, but they are in no hurry because this tax credit is good for a year.
5. The National Debt Ceiling was raised by $800B to $10.6Trillion.  That’s TRILLION.  That total debt should really scare you.
6. The bill DIDN’T stop lobbying by Freddie/Fannie.  These big bad companies spent so much money on lobbying costs that they got everything they ever wanted while they were making money – AND got bailed out when they lost money.  Something is rotten in Denmark!!!!

Consider this bill, and talk about what it will do and won’t do to the US economy.