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Archive for September 2008

Letter to my congresscritter

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There’s a lot of truth to the bumpersticker: ” If you think there’s nothing wrong with your Congressman, you’re part of the problem. “

For what it’s worth, I’m posting my fax that I sent to my congresscritters. Since they’re going to pretend it’s a democracy, I’ll keep playing along.



via fax: (202) nnn-nnnn


Dear [insert congresscritter]:                             September 24, 2008

The fact that the White House is flying by the seat of its pants is itself the very reason to reject the Wall Street bailout aka “Paulson’s Folly.”  Federal Reserve Chairman Bernanke has admitted the deception:  there will be no “low bidder” auction; instead the Treasury will pay above-market prices. Outrageous!

Of course the Treasury is going to pay above-market prices and rich premiums for the mortgage bonds. This ‘clog’ of bad investments to which they keep referring could be cleared immediately at lower offered prices. But no one on Wall Street wants to take their medicine. Wall Street paid out BILLIONS in bonuses (God bless ‘em,) but now Congress should not force the taxpayer cover the losses.  This proposal is reeks of “heads Wall Street wins; tails I lose.”  Do not participate in this highway robbery.

As little as two weeks ago, Paulson assured the public that the system as was safe and sound.  They scurry around now, urging panic and spreading fear, to prevent Wall Street from paying the tab for their recklessness.  King Henry is either incompetent, ignorant, or deceptive, and he and his successors are unworthy of neither a $700 billion revolving line of credit nor continuing in their high office. 

Their unstated purpose is to prevent a dollar collapse by making a market for foreign holders of US mortgage bonds. The fact that, by the proposed law, those bonds have to first be laundered and marked-up through US-headquartered firms is just gravy for Wall Street. 

It is prudent to restrict the authority to purchase only those securities that were owned by an American firm prior to July 4, 2008, or some such date that prevents a foreign bailout. 




Brian G. Heyer, CPA, MBA


P.S.  Remember what happened the last time President Bush rushed to action with only a “just trust us.”     Fool me once, shame on me.  Fool me twice…


Written by heyercapital

September 24, 2008 at 11:03 am

Posted in Uncategorized

Mish: Weep For The Unites States of America

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Hat tip to Mish Shedlock for posting the legislative text of the highway robbery in progress. 

Clever minds might recall that ob/gyn Dr. Ron Paul has long advocated solving the abortion atrocity by removing it from the jurisdiction of the Feral courts by merely passing a law saying so.  The Congress, by the Constitution, determines the structure and jurisdiction of Feral courts, including the supreme Court.  [Note that the Founder wrote it as “supreme Court” as they wouldn’t dare to presume to rival the Almighty’s Supreme Court.]
Dr. Paul, who actually reads the Constitution, had his idea was poo-pooed as an unthinkable “nuclear” option, since Congress would never ever ever presume such authoritah and upset the balance of the kabuki in Washington. 
 Not to mention the fact that with the abortion issue largely solved, the GOP wouldn’t have a large electorate in their pocket. 
Well lookee here.  It appears some congress critters really do know how to read the Constitution. The mortgage bailout legislation (below) specifically removes the bailout from the feral Court review. 
And raises the debt ceiling without the usual GOP chest-thumping about fiscal responsibility. 
And authorizes $700B in new deficit spending. 
And authorizes the feral government to purchase your mortgage note. 
We know how desperate Congress can get when money [but not a baby] is at stake.  Let see if they make missing a mortgage payment a criminal act.
Mish’s blog post below.  His daily blog is highly recommended. 

Weep For The Unites States of America

The New York Times has the Text of Draft Proposal for Bailout Plan. Given this is legislation, under fair use terms, here is the complete draft. My thoughts follow.



Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.–The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.–The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for–

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.–The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets.–The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets.–The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.–The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets.–The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary.–The term “Secretary” means the Secretary of the Treasury.

(3) United States.–The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.

Weep For The Taxpayer

Notice that this bill raises the national debt. Notice that the bill is supposed to take into consideration “protecting the taxpayer”.

The reality is this bill does not and cannot protect the taxpayer. Rather this bill only promises to take the taxpayer into consideration. The Treasury will indeed take the taxpayer into consideration, then immediately discard any such ideas.

Inquiring minds are also noting “The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.”

The idea behind the above statement is to allow for a continual dumping ground such that there will always be $700 billion in toxic garbage held under this program. As soon as any asset can be unloaded by the Treasury at cost, another toxic loan is eligible to be assumed on the books of the Treasury. This process can last for as long as two years.

Unconstitutional Provisions

Pay particular attention to section 8.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Essentially the law will state that whatever the Treasury does it is above the law. Such a provision is undoubtedly unconstitutional.

Weep For The Free Market

It’s time to Weep For The Free Market (or rather what little free market the US had left).

Weep For The Unites States of America

At taxpayer expense, Bernanke and Paulson are willing to bail out their banking buddies at enormous expense to the average taxpayer of this country. Bernanke and Paulson should both should be fired. Instead Congressional sheep will baa yes to this bailout and Bush will baa yes when he signs it. It is a sickeningly sad that day for America that Congress will go along with this proposal that makes the US Taxpayer A Giant Dumpster For Illiquid Assets.

$700 billion will be wasted by this program and it is $700 billion the US does not have to waste. I ask that everyone vote against any congressman who votes for the passage of this bill.

Mike “Mish” Shedlock
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Written by heyercapital

September 20, 2008 at 3:54 pm

Posted in Uncategorized

Trading bottom??

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I thought this anecdote might shed some light on the market swings, and how bad it was mid-day. 

Heyer Capital is a registered investment advisor, and my clients typically have some money with me, invest on their own,  and/or  have some with stockbrokers.   A client said she called her stockbroker this morning, and her stockbroker was crying, paralyzed with market anxiety. 
When clients need to cheer up their stockbroker, that seems, my friends, an awfully lot like a trading bottom.  
Risk is high, given the two 800 lb gorillas fighting (an election-year government that can reach into your pockets squaring off with the market’s huge pent-up imbalances.)  Watch for the “Follow Through Day” in Day 4-7 after this reversal day (if new lows are not made before then.) 
Remember, these big up-days occur 80% of the time in the context of a bear market.  Keep stocks, if you have ’em, on a leash.  My fingers have already been burned in the past couple days, so I get the reminder notice to myself that sometimes fools and their money are lucky enough to hook up in the first place. 

Written by heyercapital

September 18, 2008 at 4:06 pm

Freddie & Fannie

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It may be of interest to know that among the largest owners of Freddie and Fannie bonds getting bailed out are the central banks of China, Russia, the middle east, and Europe.  Thanks Politicians!  

So, what would have happened if the government had not used yours and your children and your grand-children’s future wages to pay the foreigners?   Nothing that shouldn’t have happened to any other company.   It would have gone into bankruptcy court and the bonds due would have been either paid out as mortgage payments are made, or the bonds would have cut down in price and investors told to live with it.  
Is that fair?  Yes.  They “pays their money and takes their chances.”  It’s called “investing” not “winning.”  
Would the mortgage market collapse?  Of course not.  If there’s a need for mortgage capital, the need will be met.  It’s just a matter of price.   I would posit that the evaporation of Freddie and Fannie would reduce the costs of mortgages.   Who would buy the mortgages from the banks?  Well, half of all American mortgages somehow, miraculously, do not get absorbed in F&F.  They are held by the bank that issued the loan.  I know it’s old fashioned in a George Bailey/Bedford Falls Savings and Loan kinda way.  Or if the bank really wants to churn loans and generate lending fees (instead of establishing community relationships) they can do it the way the rest of the world does it and issue ‘covered bonds.’   Wall Street excels at a little more than finding ways to move money from one pocket to another (typically yours to theirs.) 
Moral hazard?   This summer the home builders received a bailout (missed that one, huh?)  Now car companies – which have mismanaged themselves for decades – are asking for taxpayer dough.  Airlines will be next in line, no doubt.   There is $600 Billion in corporate debt that has to be renewed by the end of the year – –  who will swallow that?
So now –  today, Tuesday – after the market has fallen worse than 3% today, we’re right back to where we were before the bailout.  What has changed? The foreign governments and Wall Street firms are richer, and you, my dear friend, are poorer, and that robbery was all over the headlines the past two days and you didn’t know it happened. 
I’ve written elsewhere about the “powers that be” running out of ammo to solve the problems. (Bank of America offered Countrywide on a platter; JPMorgan’s shotgun marriage to Bear Stearns; the Fed using its balance sheet to launder capital for the Wall Street firms; emergency SEC rules that benefit only a select few firms; deficit spending at record levels;  private employment falling, tax mooches getting hired left and right,  etc. etc.)  They’re running out of ammo, and the last bullet will be pointed inward. 
Who will be left to bailout the taxpayer?

Written by heyercapital

September 9, 2008 at 3:13 pm