Sushi Money

Disheartening.  Among other things.  It seems that the government intends to punish those who would work hard to build and achieve in life while rewarding those who do not.  It seems we are intent on rewarding failure, or the status quo, and punishing success.

It is shocking to consider that the new administration has proposed more spending in the past six weeks, than all other U.S. government spending from the founding of the country to January of this year.  Some of this spending may indeed do great things.  Yet most of this spending is money that we and our children’s children will long carry the burden for.   We call it spending, but it’s really borrowing.

Is all of this spending and new legislation really designed to fix the economy over the short term?  Or is it something more, something greater- a design or framework of spending established to foster a new political structure for the future?    It doesn’t seem that the stock market has any degree of confidence over the direction of government policies and support for free enterprise.  The past couple of months have seen nothing but great uncertainty and fear. 

The stock market has lost 25% since the beginning of the year… 3,000 points since the November ‘08 elections!  And the President is running out of people to blame.

“What is new is the unveiling of Mr. Obama’s agenda and his approach to governance. Every new President has a finite stock of capital — financial and political — to deploy, and amid recession Mr. Obama has more than most. But one negative revelation has been the way he has chosen to spend his scarce resources on income transfers rather than growth promotion. Most of his “stimulus” spending was devoted to social programs, rather than public works, and nearly all of the tax cuts were devoted to income maintenance rather than to improving incentives to work or invest.”

Incentives to work or invest… that, coupled with hard-working people, is what has made America great, through a framework of capitalism under the umbrella of freedom and liberty to pursue one’s dreams.  That is why people have always seen America as the Land of Opportunity.  How do we foster business growth and entreprenuership, hence jobs, profit and spending, when we become the Land of Income Transfer and Social Programs?   Ultimately we would become a wasteland of mediocrity.  

Would you buy a home or even want to live somewhere that didn’t have the structural vibrancy of free enterprise to support the citizen’s needs?  Where business failed and crime became rampant?  Where people were leaving in droves because there was no reason to stay? Look around… there’s a city or two across the nation well on their way to that eventuality.   What does that say about the path for our nation?

In very specific language for example, the pending legislation on the budget reduces taxable deductions for charity and mortgages for those making $200,000 (individual) or $250,000 (family)  per year.  To be perfectly candid, I do not make that much money each year.  But I know many people who do… and they are not rich. 

Certainly they live more comfortably than someone making $35,000 per year, especially with a family.   But most of these are people who have also worked incredibly hard in life becoming educated, growing a business, or taking risks in order to provide a home for their family and often a business in a small community.  And we are increasing taxes in key areas that may dissuade these people from giving to charity or deducting interest expenses on their home mortgage.  Those extra tax dollars they pay will need to come from somewhere- for a business, maybe one less employee.

Will this legislation help charities?  Will it help support home sales across the nation?   Maybe you believe the taxes are too low to really matter, and these folks can afford it.  Well they probably can afford it, but it doesn’t change the fact that they will be paying more money to the government who in turn will be redistributing it to people, or institutions, who can’t.  Some folks think that’s a good thing, and it’s only for a short while. Let’s hope so, because it cannot last.   

It’s not just those making a lot of money who will pay of course.  We will all pay. More importantly, who will finance this tidal wave of income transfer and spending?  We, the people, will.  Those who work the hardest to grow and achieve things in life.  Taking things away from achievers and giving it to those who are not is simply unsustainable.

Update 2-27-09:   The National Surface Transportation Infrastructure Financing Commission is recommending that the U.S. government taxes drivers by the mile!  This commission was created by Congress to explore options to raise money, and says the current 18.4 cents a gallon gas tax and 24.4 cents a gallon diesel tax are not raising enough money to keep pace with transportation costs…

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I didn’t think it would come to this, but a ground-swell of opposition is mounting for huge government programs and regulations.  If you’ve ever wondered what it would be like to have government looking over your shoulder at every turn- the next few years may show us what that could be like- literally.

How about a device in your car that monitors every mile you drive- anywhere- and taxes you on the amount of miles you drive every month?  Or in a year?  Is that incredible?   The new U.S. Transportation Secretary wants to tax you on the miles you drive in your car.  It won’t matter if you drive a high-mileage Honda, a big ‘ole cement truck or a motorcycle… you’ll still pay taxes on the miles you drive.   For someone who lives near their job, or in a metropolitan area that might not be a bad idea.  But what about millions across the nation who commute to work? Or millions more who live in rural America?  And what if your job depends upon driving many miles? 

Can you imagine anything that would provide more disincentives for economic growth and consumer spending across America?  They think people are not spending money now, if I knew I would be taxed at every turn for driving my car why would I drive to the small town down the road for ice cream?  What would happen to travel and tourism?   Too many negatives associated with that… and I have to wonder who in their right mind thinks of these things.   Personally it’s just not the American way.

I’d love to know what the U.S. Commerce Secretary thinks of this idea.   Travel and transportation serves as the basis for trillions worth of commerce in the United States…

With tax season here, many of us are pulling out the shoeboxes full of receipts and sorting through 1099’s this month. I don’t usually have all the necessary forms until mid-February or beyond, but getting a start now makes things a lot easier.

Once again it’s time for TurboTax… software I’ve been using for over 20 years. I almost dropped the program this year and switched to H&R Tax Cut when Intuit jacked up charges for extra returns and printing functions. Fortunately a loud outcry by TurboTax users convinced Intuit to reverse plans for increasing fees. 

Overall it’s decent software, and makes filing your taxes much easier.  I’m glad that I can import last year’s tax file to save a lot of typing, but filling out tax forms is never simple in itself- even with software.  It’s a tedious annual ritual that most of us faithfully perform.  Of course it would be nice to have a few of the perks of our vaunted leaders in Congress.

For example, a GOP Congressman from Texas has intoduced a bill that would eliminate IRS late fees. What a grand idea- it’s called the “Rangel Rule” after House Ways and Means Committee Chairman Charlie Rangel, D-N.Y:

Rangel, who writes the country’s tax policies, acknowledged last fall that he failed to pay thousands in real estate taxes for rental income he earned from a property in the Dominican Republic.

As of September 2008 the Harlem Democrat reportedly paid back more than $10,000 in taxes but that did not include any IRS penalties.

“Your citizens back home should have the same rights and benefits that come to you as a member of congress. You shouldn’t be treated any differently under the law than your citizens back home,” Congressman John Carter, R-Texas, said.

He added that citizens should receive the “same courtesy” that the IRS is allegedly granting Rangel and Treasury Secretary Tim Geithner, who also recently acknowledged a failure to pay taxes.

Will the bill pass? Probably not, but maybe it will bring a little attention to issues like this. Carter, a former judge, said he is trying to focus in a what he believes is a double standard and add some levity to the debate.

“I am raising this issue not so much to just push the issue but to open the discussion. I don’t think it’s wrong for us to start having a free discussion in congress and with a certain amount of humor in it about how should people be treated in congress,” he said.

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Sounds like a good idea. I think when folks get into Congress they forget what it’s like for the average American.  And the average American has become quite upset at the recent nomination of high-profile people who haven’t figured out how to pay their taxes properly. 

“An overwhelming number of Americans are outraged by tax cheats, according to an Internal Revenue Service poll released after two top US administration nominees withdrew over tax scandals.”

“The 89 percent of Americans who find it “not at all acceptable” to cheat the agency was the highest recorded since the survey of taxpayer attitudes began in 2002, the IRS said.”

“The poll was released after President Barack Obama’s candidate to become Health Secretary, Tom Daschle, abruptly withdrew Tuesday after it was revealed he had paid more than 120,000 dollars in back taxes.” 

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Whatever your situation, the most important thing about tax season is to file your taxes! Everyone has fears about tax season, most of which are unfounded. But putting off filing taxes, or not responding to IRS notices just makes things worse. Here’s a quick look at 7 Tax Terrors and what you can do to overcome them, and TaxHelpOnline has a more thorough look at helping solve and figure out tax problems. The first line is a good one:

“General Accounting Office studies have shown that IRS correction notices are wrong half the time. The common correction notices include claims that made an error in your return, that you failed to file a return or underreported the income in your return. If you get a correct notice from the IRS that you do not understand, there is a good chance it was issued in error.”

You never know- but one thing is for sure: Avoiding responding to the IRS will not help you resolve the problem. I’m not using a CPA at present, but you can be sure that if my taxes become too complicated or I’m concerned about doing them correctly, that I’ll find one pretty quickly.

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Taxes aren’t the only issue where most Americans face challenges that our leaders in Congress don’t understand. Take the global warming debate for example- President Obama and his party want to pass a host of climate legislation that is quite a mess based on divergent geographic needs and interests. This could not only affect real jobs and manufacturing, but also impact the average American’s energy bills each month, and overall U.S. economic growth. Over time we may have to pay a lot higher prices for our energy needs in winter, especially for folks living in the midwest.

“By coincidence or design, most of the policy makers on Capitol Hill and in the administration charged with shaping legislation to address global warming come from California or the East Coast, regions that lead the country in environmental regulation and the push for renewable energy sources.”

“That is a problem, says a group of Democratic lawmakers from the Midwest and Plains States, which are heavily dependent on coal and manufacturing. The lawmakers have banded together to fight legislation they think might further damage their economies.”

I’m one of those midwesterners who depends upon a diverse mix of resources to supply our energy needs- and I can assure you our monthly bills are high enough. Personally we already do everything we can at present to lessen our use of energy in winter at home. There’s only so much more you can do- and at some point we’re just going to pay higher taxes and fees because someone has a grand plan to “lessen our dependence” on the need for certain resources.  That debate is just getting started…

Catching up the past few weeks on some much needed organization, and a little more focus on priorities at home.   Most of those priorities involve looking very hard at our financial picture.   Congress is doing the same thing, but I’m not sure their priorities are all financial.  It’s politics after all, and the stimulus plan has now become a political spending platform.  Lately it seems that Congress wants to spend billions on a host of programs that may or may not help over the short-term, or that we may not see for decades.   Economists know that Components of the Stimulus will Vary in Speed and Efficiency.

“Devising any economic stimulus plan is tricky: initiatives that can be carried out relatively fast, like tax cuts, tend to provide less bang for the buck in terms of generating jobs and economic growth, while initiatives likely to spur more robust activity, like public works projects, can take so long to get under way that they arrive too late.”

But the country is trying to claw it’s way out of this recession, and today’s news reflects the magnitude of the challenge with the largest drop in GDP since 1982.   Now the debate is whether we’ve seen the worst, or that this drop in GDP is just a preview of worse economic conditions to come.  Consumers have really tightened their belts:

“Hit by tight credit and soaring job losses, Americans slammed the brakes on spending in the quarter.”

“Consumer spending fell at a 3.5% annual rate, which was the seventh biggest drop on record. Spending on big-ticket durable goods plunged at a 22% pace, the largest decline since 1987. Consumer spending accounts for more than two-thirds of overall economic activity.”

“But it wasn’t just consumers pulling back. Fixed investment in equipment and software, taken as an indication of business spending, plunged at an annual 28% rate. That’s the biggest drop in 50 years.”

So this certainly gives momentum to the stimulus package.   Honestly, most Americans just want the government to do whatever is necessary to get our economic engine restarted.  Exactly how you define the “whatever” is the problem.  Increase spending?  Cut taxes?  It’s the age old debate, and even Rush Limbaugh opines in the Wall Street Journal that there could be compromise… we could do a little of both.  

“There’s a serious debate in this country as to how best to end the recession. The average recession will last five to 11 months; the average recovery will last six years. Recessions will end on their own if they’re left alone. What can make the recession worse is the wrong kind of government intervention.”

“Keynesian economists believe government spending on “shovel-ready” infrastructure projects — schools, roads, bridges — is the best way to stimulate our staggering economy. Supply-side economists make an equally persuasive case that tax cuts are the surest and quickest way to create permanent jobs and cause an economy to rebound. That happened under JFK, Ronald Reagan and George W. Bush. We know that when tax rates are cut in a recession, it brings an economy back.”

“Recent polling indicates that the American people are in favor of both approaches.”

“Notwithstanding the media blitz in support of the Obama stimulus plan, most Americans, according to a new Rasmussen poll, are skeptical. Rasmussen finds that 59% fear that Congress and the president will increase government spending too much. Only 17% worry they will cut taxes too much. Since the American people are not certain that the Obama stimulus plan is the way to go, it seems to me there’s an opportunity for genuine compromise. At the same time, we can garner evidence on how to deal with future recessions, so every occurrence will no longer become a matter of partisan debate.”

I believe we need to do whatever fosters business and job growth- expanding economic activity- and both spending and tax cuts can achieve those goals if used effectively.  What effectively means is the real question.  Between job insecurity and the challenges of winter, energy costs and taxes- consumers have got enough to deal with over the next few months.  Let’s hope our elected leaders get it mostly right.

It’s a new day, a hopeful day, a day of change- and America moves forward again.  Regardless of anyone’s political views, it is heartwarming to see democracy in action in our free Republic, and to see the spirit and pride of millions of Americans on this day that President Obama takes office.

The older I am the more I appreciate the timelessness of all that I’ve been privileged to witness in my life, and that we see in America.  And I am proud that through all the challenge and chaos of our lives, we can find strength in the values upon which our nation was founded, and for which we stand together today.

So many people have bearish and near-catastrophic views of the nation and the economy that you would think the world was ending.  It very well may be, but not anytime soon.   The economy and recession in the late 70’s and early 80’s was far worse, and people didn’t seem to be as negative about it then.    The pendulum will swing, times will change- slowly- almost without recognition and we will come out of this just as we have before.  That’s my view, and it may be early, but if there’s one thing that life and the market teaches you, it’s patience. 

If you’re facing challenge and hardship, I wish you strength and opportunity- it will come, hang in there, and don’t give up.  And if you’re enjoying success and security from years of hard work, I wish for you peace and a chance to help others where you can.  

Where we are as a nation may seem a reflection of the immediate external economic realities we face each day.  But the nation is stronger and bigger than what we see each day.  We will move on, we will grow stronger, we will prosper and we will restore opportunity within America in the months and years ahead.  

“Out with the old, in with the new” as the saying goes.  Timely words for welcoming a new year that will hopefully be a far cry from last year, at least financially speaking.    For many of us the new year also means a new commitment to getting rid of debt and increasing savings.  In short, through circumstance or necessity, many of our priorities have changed.  

Jim Citrin looks at Getting Back to Basics in 2009, describing how changing priorities have affected business perspectives:

“The era of unchecked consumerism and financial excess had the insidious effect of devaluing everything. Why save money when you could borrow to get whatever you wanted? Why hang on to clothes and appliances when you could just go to the store and buy new ones? Why make structural improvements to your business operations or deepen customer relationships when you could push more stuff to get the growth that Wall Street demanded?”

“In one fell swoop, these attitudes have ground to a halt. They’ve been replaced by millions of healthier conversations in conference rooms and around kitchen tables about how to save, conserve, and prioritize.”

The article looks for a silver lining, examining how we can reconnect and make the best of the difficult times we live in.  I appreciate his views because it makes the simple point that we have a choice with how to respond to the current economic environment.  Sit around and wring our hands?  No. We need to get up and do something about our situation, and work to improve our lives and fortunes.

Admittedly the really tough part of the economic challenge we face is how far it has reached into people’s lives.  Between housing, the stock market and the credit crunch, the financial challenges have touched every level of the socio-economic spectrum.   For those who have lived too long on debt and excessive borrowing, the money faucet has been turned off.  Now they’re struggling to save, get by and get rid of that debt.  Others are struggling with layoffs and trying to find a job.  And even for those who saved and invested diligently through the years, the stock market’s downward spiral has demoralized investors into wondering why they ever invested in the first place.

A lot of frugal and industrious folks today are wondering if they should have just spent more of their money when they had it, instead of scrimping and saving through the years only to watch it disappear in a few months.

Most of all it’s just hard to feel confident about our choices right now.  And we’re shocked when reading about financial scandals and corruption.  It’s no surprise that many people have moved their assets to cash in CDs and savings accounts, deciding that something is better than nothing.   Nothing wrong with that, especially if you need the money in 3-5 years, or you are already retired and may need that money for healthcare or living expenses.   But the rate of return on those accounts is really low, and most planners will still target a growth or dividend component in the overall allocation mix if possible. 

Dividends are also king right now for investors, and there’s nothing like getting paid to hold a good company in stock.  Fixed income investments also may offer some of the best opportunities in the next few years.  Cash-wise I’m at least putting some money into a good quality high-yield savings account such as with ING, and money market accounts such as Vanguard Prime.  If you want treasuries (who doesn’t!?), Vanguard also has several treasury mutual funds.

And I’m certainly still investing in mutual funds and selective stocks, taking advantage of low prices and increasing savings and investments where I can afford it.  Is that a gamble?  Not for me, since I don’t plan to need the money for 10+ years.  If you feel like it’s gambling, then that should tell you something about your risk tolerance, and you should look for a more conservative asset mix. 

But if you’ve got decades until retirement, there’s no better time than right now to accumulate investment shares.  As long as your financial life is in order of course.  I call it my Big Three, and they remain the central focus of our financial lives:  Cut Spending, Pay down Debt, and Increase Savings.  After the first two are under control, then I think about investing.

If you’re feeling bad about your mutual fund losses, most of us can be glad we didn’t join the Dubious 60% Club, and that’s not 60% up…  Bill Miller was a high-flyer for about 15 years as a leading mutual fund manager, but for the past few years- well mostly last year- he has crashed and burned.   It just goes to show that anyone can make poor choices and lose money in the market.  Does that mean he’s sulking in some corner office, licking his wounds?  Absolutely not.  He’s still in their fighting and even managed to beat the S&P 500 for December 2008.   

As we ring in the new year, there’s a host of excellent pracitical advice out there.  Here’s a rundown on some of my favorites:

• The Wall Street Journal offers an eclectic mix of insight for How to Fix Your Life in 2009.  “Exuberance and excess have made way for prudence and pragmatism. Frugality is, once again, a virtue. To help you settle into this strange new world, our reporters have dug deep into their beats…”

• SmartMoney.com shows us 7 Ways to Save in 2009.   “Reducing monthly expenses and saving more money is the must-make resolution for 2009.”

• Kiplinger.com offers a classic article from a few years go reviewing 8 Keys to Financial Security. “Pay yourself first. Protect your loved ones. Borrow sparingly. And don’t go for the home run…”  What a great, timeless article.

• Laura Rowley takes an heady look at the psychology of Understanding Money Behavior in a Financial Crisis.  “One of the keys to surviving the economic crisis, at least from a psychological perspective, is recognizing what you can and can’t control. And not doing destructive things while you’re powerless.”

I wish you a healthy and prosperous new year for 2009.  Sushi Money is two years old this month, and it’s been a grand experiment in the personal finance blogging world.  I don’t how long I’ll continue to write here, and I may look for a different financial niche.  But its been a lot of fun.  One of my goals includes are greater focus on philanthropy.  I’m in little position personally to make significant philantrophic gifts, but I am very thankful for the time and resources I do have available. Maybe there’s some kind of venture in the making.  

In times like these it’s important not to forget those who are struggling.  The economy will gain traction slowly, but there will be many who are left behind.  As we strengthen our own financial lives, it seems a good time to try and help a few others along the way.

It’s been a busy month with the holidays, and equally busy keeping up with the economic news, most of which isn’t very good.  But at the pump we’re all smiles these days with gas prices hitting five year lows.  Believe it or not I saw gas selling for $1.29 yesterday.  That is amazing, and to think of how much money Americans have wasted over the past couple of years in terms of fuel is even more amazing. 

Maybe wasted is a poor choice of words, but at least we’re not giving billions to third-world crazies anymore while the global recession has reduced demand (and speculation) incredibly.  The good news is how much we’re now saving here at home, and ”Tom Kloza of the Oil Price Information Service says Americans are paying about a billion dollars per day less than in July.”

At least that’s money people can use for other needs during one of the greatest recessions in decades.  But oil prices won’t stay this low forever, and some analysts see prices recovering later in 2009 or 2010 based on greatly reduced oil refinining capacity.  I hope that’s not the case- seems to me we got into the mess partly due to the fact that we didn’t have enough refineries or production capacity.  The big oil companies have little incentive at this point to expand their capacity however, so eventually demand and speculation will increase again.

Maybe we’ll be helped by better mileage cars and alternative energy?  Maybe.  I wouldn’t count on it, but every little bit helps.  That’s especially true in today’s economy, where many people are finding it difficult to juggle income against debt.  I hope you’re doing well at the end of such a tumultuous year, and that 2009 will be a whole lot better for all of us.

So much going on lately it’s hard to keep up with.   Staying too busy and not looking at the market gyrations each day.  It’s almost like a financial soap opera at times with the spin on the financial crisis.  Yesterday some of the headlines read that consumer prices fell by over 1.7%, which is nearly the greatest amount since 1932.  Yet core inflation was unchanged.  There’s always a story to be found somewhere in the financial news.

So now we’ll be reading about deflation as a grave concern by the Fed and others.  Maybe it is.  But energy prices have fallen so far, so fast that it influences the greater part of the drop in consumer price data.  Based on the past years CPI data, Social Security recipients are getting one of the largest Cola (cost-of-living-allowance) increases since the early 1980’s- 5.8%.  But don’t spend it all at once! Over the last couple of months the drop in consumer prices might indicate a meager Cola in 2010.  So it’s like getting next year’s increase now. 

The bigger news yesterday was the Fed’s lowering of the Fed Funds Rate to nearly zero percent.  That should ultimately influence some interest rate direction, but it’s not all good news.  It might ultimately influence mortgage rates, but it also means lower rates on savings accounts and CD’s. The Fed is really trying to do all it can to stimulate the economy and the business cycle.   Business growth produces jobs, and we know the employment news hasn’t been good lately.

Yet even with interest rates falling, this financial crisis is unlike others in the past.  Instead of falling credit card rates for example, many consumers are receiving notices of increases to their credit card rates, as well as reductions of their credit limits available.  Financial institutions such as Citigroup are citing a “difficult market environment” as their justification for raising rates.  This is a huge problem, especially on the eve of Congress’ new laws regarding consumer protections with credit cards.   

My opinion?  That’s why these companies are raising rates… because they’re not going to be able to after Congress tackles the issue.  Federal regulators are poised to make huge, sweeping changes to the credit card industry- and much strong consumer protections.  So the credit card companies are changing the game to their own benefit now while they can, and it’s not helping consumers.  

Even one of the most customer-friendly financial institutions in the country- USAA Federal Savings Bank- has notified customers that it’s raising rates 2% or more above current rates as a minimum!  You don’t have any choice with this other than to “opt out” after which the card/account will be closed.  Personally I think it’s a disgrace- but these companies are in business to make money, and if they can’t make profit at a certain level, they will raise rates to do so.  As it stands now, they’re concerned about losing money in light of low Prime and variable card interest rates. 

One would think these same companies shouldn’t be able to do this, especially if they’re receiving federal bailout money.  Maybe that’s an indicator of just how bad things have been.

So paying down (or staying out of) debt is more important than ever.  And don’t look for those zero-percent balance transfers to help out either.  They’ve disappeared like a lot of other things, and we just won’t be able to play the ‘ole credit card shell game as much anymore. 

Otherwise everyone’s busy!   It seems like we’re making progress from a macro perspective with the financial challenges we face.  The Fed’s doing all it can to move money around the economy, and maybe the banks will start to lend more in the months ahead.  I’m not a market prognositicator, but I still believe valuations are incredible and offer some of the best investment opportunities we’ll see in our lifetimes.   I’m not chasing stocks or the next big thing, but just trying to stay patient, and focus on long term goals.    Have a great holiday week.

*** Update ***  Apparently the Treasury Secretary’s plan does NOT include plans for current homeowners to refinance their loans.  So while many of us may sit on mortgage loans at greater than 6% or 7%, this plan would allow neighbors to move in to their house with a new mortgage loan with much lower payments.   This seems wrong… it may be a temporary fix, but how will it help millions of current homeowners who are having trouble making payments on their current mortgage loans? 

This week we found out we’re officially in a recession, and have been since around December, 2007.  The market has been wallowing at multi-year lows and layoffs have been increasing.  In light of so many economic challenges, it’s hard to see any bright spots that can move us forward.  But what about a lower mortgage payment?  Would a couple hundred extra bucks each month really make a difference, or help people purchase a house?

For many of us, it just might.  That’s the focus area of the government recently- mortgage loans and the possibility that a U.S. sponsored wave of mortgage activity and refinancing could bolster both the housing market and the economy as a whole. 

“The plan, which is in the development stage, would temporarily use the clout of mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates as low as 4.5%, more than a full point lower than prevailing rates for standard 30-year fixed-rate mortgages.”

“The plan is very similar to an idea floated in October by R. Glenn Hubbard and Christopher Mayer, academics at Columbia University’s Business School. “I think a program to substantially bring down rates for homebuyers would be an incredibly valuable program, and I think it captures a real part of solving what has been an incredibly challenging dislocation in the credit markets,” Mr. Mayer said in an interview. He estimated the idea under consideration could quickly help 1.5 million to 2.5 million people buy homes, giving a major boost to the housing market and broader economy.”

Certainly people would still need to qualify for the mortgage and have decent credit ratings to do so.  But a 30-year loan at 4.5% ?  Sign me up… not only would the monthly payment for many of us decrease, we would be able to focus more on reducing debt levels and increasing consumer spending.  *** Not for current homeowners! ***

“…Treasury Secretary Henry Paulson views lowering mortgage rates as key to fixing the housing crisis; hence the mortgage-security-buying program announced last week.  The most important thing we can do to mitigate foreclosures and progress through the housing correction,” Mr. Paulson said in a speech Monday, “is to reduce the cost of mortgage finance, so more families can afford to buy a home and so homeowners can refinance into more affordable mortgages.”

I have to agree (for once) with Secretary Paulson- making homeownership more affordable for credit-worthy families sounds like a great idea.  As long as we aren’t handing out loans to people that can’t repay them… hopefully we’ve learned that lesson already. 

Just for kicks I ran the numbers on the difference between the monthly payment for a 6.5% 30 year fixed-rate loan, and the same loan at 4.5%.  These numbers are for principal and interest only and don’t include taxes or insurance payments:

• 6.5% 30-year fixed-rate loan:   Monthly payment of $1,137.72
• 4.5% 30-year fixed-rate loan:   Monthly payment of $ 912.03

Okay, so we save about $225 bucks a month with the new mortgage. That’s not chump-change, and lots of folks can qualify for a 4.5% loan that would not otherwise qualify for a 6.5% loan.  Even refinancing is a great idea as long as we’re planning to stay in that house for a few years or more.   *** Not for current homeowners! ***

A Rush Into Refinancing may be just what the country needs right now however. But the new plan may not even include this option!  

I thought that’s what the Treasury Secretary was aiming for, and how they believe it can help dig out the country from the current housing mess.  Get more people into homes sitting empty out there, and make those monthly payments more affordable for all of us.  Good idea, but if they exclude current homeowners, then I don’t see how it helps the economy en masse.

By the way, what’s even more important over the long term on that interest rate scenario?  Think about how much interest you would be saving. 

• 6.5% 30-year fixed-rate loan:  Total interest paid $229,587
• 4.5% 30-year fixed-rate loan:  Total interest paid $148,336

That lower rate loan would save us over $81,000 dollars!!!

Sounds pretty good to me- that would pay for a kitchen and bath remodel, or even a few new cars over the lifetime of that mortgage loan. 

So is it time to buy that house you’ve been looking for?  Time to wade into real estate again?  Well, the real estate debate continues, and there are many opinions.   Even if a lot of us can think of several really good real estate deals out there, the money’s just not there right now.  And that’s part of the problem- with the stock market down, real income down, and folks losing their jobs, we’re running out of people that can qualify to purchase real estate.  

Maybe, just maybe, lower long term mortgage rates will help us climb out of this whirlpool?  Hard to say- that whirlpool is also a downward spiral… and deflation can take a long time to work out of.  Just ask the Japanese.

How does a well educated middle-aged registered nurse end up losing $400,000 to scam artists?  For the life of me I can hardly understand how this is possible, especially because it’s such a well known internet scam and involves the red-flag word “Nigeria”.   This otherwise intelligent (maybe not) woman emptied her husband’s retirement account, and took out loans on their house and car all to continue sending money to thieves half way across the world.

“It turned out to be a lot of money up front, but it started with just $100.  The scammers ran Spears through the whole program. They said President Bush and FBI Director “Robert Muller” (their spelling) were in on the deal and needed her help.“

Ahem… well, you see Presidents and FBI Directors don’t ask regular people for help.  Unless they’re behind in the polls for re-election perhaps… But important people have, you know- other people to do that kind of stuff for them?

“They sent official-looking documents and certificates from the Bank of Nigeria and even from the United Nations. Her payment was “guaranteed.”  Then the amount she would get jumped up to $26.6 million “ if she would just send $8,300. Spears sent the money.”

“More promises and teases of multi-millions followed, with each one dependent on her sending yet more money. Most of the missives were rife with misspellings.”

Okay, I guess if someone’s going to give me a lot of money I won’t hold their spelling problems against them. 

“When Spears began to doubt the scam, she got letters from the President of Nigeria, FBI Director Mueller, and President Bush. Terrorists could get the money if she did not help, Bush™s letter said. Spears continued to send funds. All the letters were fake, of course.”

Oh boy.  Even worse, she was told it was a scam by relatives, friends and other professionals, and was advised to stop- and still she kept sending money.  No offense Ma’am, but I hope your nursing judgement is better than your everyday, ah, money handling judgement.  

This type of “Nigerian” scam is a called “advance-fee fraud” and it has been around for a long time.  Even worse, it’s reaching an epidemic level and people keep falling for it!   What’s the best way to avoid it?  Just don’t reply to any email or letter than has anything do with Nigeria for one…  more importantly think about these words from the Federal Trade Commission:

If You Receive an Offer

• If you’re tempted to respond to an offer, the FTC suggests you stop and ask yourself two important questions: Why would a perfect stranger pick you ” also a perfect stranger ” to share a fortune with, and why would you share your personal or business information, including your bank account numbers or your company letterhead, with someone you don’t know?
• And the U.S. Department of State cautions against traveling to the destination mentioned in the letters. According to State Department reports, people who have responded to these “advance-fee” solicitations have been beaten, subjected to threats and extortion, and in some cases, murdered.
• If you receive an offer via email from someone claiming to need your help getting money out of Nigeria ” or any other country, for that matter ” forward it to the FTC at spam@uce.gov.
• If you have lost money to one of these schemes, call your local Secret Service field office. Local field offices are listed in the Blue Pages of your telephone directory.(I never knew that!?).

Admittedly some people get involved in a scam and it becomes an obsession to fix it, get their money back or it becomes some type of self-denial.  That’s such a shame, and it must border on psychological issues sometimes.  But apparently the woman in the article above would like other people to know her story so maybe it can prevent someone else from falling into this trap.  Good for you lady, and thanks for sharing it.  It’s too bad you couldn’t have done so earlier without losing so much money.   

It also upsets me that our government, and the governments of Nigeria or other countries cannot do something to prevent or remedy this type of situation.   It’s bad enough when we’ve lost 36% over the course of a year in the markets- but to just give our life savings away to scam artists?   Don’t fall for it!

For More Information

More information about Nigerian Advance-Fee Loan scams is available from the U.S. Secret Service (www.secretservice.gov/alert419.shtml).

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.