A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.
We ordered my wife one last weekend. Her other iPhone was the 3Gs and was well over 2-years old. I think she’ll be impressed with the new phone. We shall see.
Switching gears to the “Occupy” movement…
Here is an interesting piece in today’s WSJ by American Enterprise Institute’s Peter J. Wallison titled Wall Street’s Gullipble Occupiers, which echoes my thoughts regarding our government’s and politicians’ involvement in helping create the crisis.
Beginning in 1992, the government required Fannie Mae and Freddie Mac to direct a substantial portion of their mortgage financing to borrowers who were at or below the median income in their communities. The original legislative quota was 30%. But the Department of Housing and Urban Development was given authority to adjust it, and through the Bill Clinton and George W. Bush administrations HUD raised the quota to 50% by 2000 and 55% by 2007.
It is certainly possible to find prime borrowers among people with incomes below the median. But when more than half of the mortgages Fannie and Freddie were required to buy were required to have that characteristic, these two government-sponsored enterprises had to significantly reduce their underwriting standards.
Fannie and Freddie were not the only government-backed or government-controlled organizations that were enlisted in this process. The Federal Housing Administration was competing with Fannie and Freddie for the same mortgages. And thanks to rules adopted in 1995 under the Community Reinvestment Act, regulated banks as well as savings and loan associations had to make a certain number of loans to borrowers who were at or below 80% of the median income in the areas they served.
That, my friends, is how the crisis got started. No, it wasn’t the entire cause but it did kick it off. I read something very similar in Thomas Sowell’s The Housing Boom and Bust: Revised Edition*, a must-read if you desire a different take on the creation of the housing crisis. Thomas Sowell does an excellent job and he uses about 1/4 of the book to list his sources.
“…there is a cost to any financial crisis, which is “contagion” where the failure of one institution or government calls others into question. The main way to contain this is to follow the century-old “Bagehot’s Rule” – lend freely, at high rates of interest, but only to institutions that are solvent and able to provide collateral for the loans. When policy makers behave as if every institution, solvent or not, is within the ring-fence, or that some institutions are simply “too big to fail,” saving these institutions comes at enormous costs, because true economic losses that should properly be taken by private investors are instead forced upon the public.”
To the protesters, I would like to add that sleeping in filth and defecating on police cars only makes you look like immature losers. GROW UP!
Rest in peace, Mr. Jobs. I can’t say I liked all of your products but we do own several of them. I have an iPod Classic 160GB crammed full of music, and iPod Nano for running, an Apple Time Capsule, my wife has an iPhone 3Gs, my oldest son has an iPod Classic 160GB and an iPhone 4, and my youngest son has an iPod Touch. Oh, and we also have a Mac Book that the boys share. Anyway, my thoughts and prayers go out to the Jobs family and all the Apple employees.