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Here is what the news isn’t telling you! September 17, 2008

Posted by shaferfinancial in Uncategorized.

Just thought I would blog on some issues and events the news isn’t bringing to you:

1.  Interest rates are so low that many of those variable rate loans that are resetting this year are doing it at or below their current levels.  So those that follow the strategy of using variable rate loans (they have inherently lower rates than 30 year fixed rates) have saved themselves thousands of dollars in interest!

2. The genesis of this financial turmoil is not banks and Wall Street behaving badly, but the 1999 repeal of the Glass-Steagall Act and the passing by the Clinton administration of the Gramm-Leach-Billey Act which broke down the firewalls between investment banks, commercial banks, and insurance companies.  Previous to this they could not delve into each others business.  Investment banks, the risk takers, could have bought the toxic mortgage backed securities, but commercial banks and insurance companies would have been unable to participate in that business.  Sub-prime was born out of investment banks, and the rest of the toxic loans were a result of this.

3. Variable rate loans are not the issue, no down payment and low down payment loans are.  Fraud in the so called “liar loans” (stated income) is another large cause of the current mess.  If people had to come up with 5% down plus closing costs, then the real estate run-up would have been contained and the values would not have yo-yo’d up and then down so vigorously.  If banks had looked at reserves closely this would have helped too.  Giving a 100% loan to someone with no money was asking for foreclosure and everyone knows it.

4.  Plenty of money is being made by businesses and investors, although those in mutual funds are seeing dramatic drops.  Why is this? Some enterprising reporter should examine this issue.

5.  Finally, the end of the world is not near.  See these two posts for great commentary:

http://www.bawldguy.com/3-star-movie-redo-of-were-all-gonna-die-iv-the-end-is-near/  and


Have a great wealth building day!



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