Category Archives: Government

My planned speech on HB2677

Arizona, Business, Entrepreneurship, Government, Internet, Money, Politics, Real Estate, The World, , ,

On Wednesday the 16th I plan to go to the capital and speak about HB2677, here is what I plan to say.  If you read this and can think of something major to change please leave a comment.   This is my first time trying to change a law.  At the end I suggest a change to the bill that would actually result in the intent being accomplished, with almost no negative side effects and a few positive ones.  Here is what I plan to say.

Hello. I am Jason Dragon, I am an elected PC and State Committeeman in the Republican party. I am here to talk to you today about HB2677.

The intent of this bill is to find a way to tax people who are here illegally and use the money to build the border fence, but it fails miserably in both of these goals. I think that we do need to protect our border, and I am for building a fence but I am against this bill.

The first, and main reason that it fails is that it will tax everyone who sends money using a wire transfer service to any nation for any reason. The bill says that this is refundable, but it is only to the extent of a tax obligation. On top of the sender will need to wait up to a year so that they can file their taxes, and then they will need to keep records of these sends, and if needed will likely be required to provide these to the DOR. The majority of citizens in Arizona do not have an Arizona tax obligation due to many deductions or other credits and not enough income; all of these people will not receive a refund. In addition many other people and businesses may send money from Arizona who do not reside here, and thus will not be able to receive a tax credit.

Illegals don’t use these services. Existing state laws, designed to stop money laundering and criminal activity, already have strict ID requirements to send money using these services. They can not pass these ID requirements if they are here illegally unless they have very professionally forged documents, so the vast majority of illegal immigrants don’t send using the services this bill intends to tax. They often will hand the money a friend who can send.

As someone who has lived overseas, operated a business overseas and sends money overseas often I know that there are much easier and cheaper ways to send money than using wire transfers that this bill simply does not cover. Illegal’s and legal’s often also use these methods to send money. The most common way would be to open a bank account in the US and receive a debit card, or buy a PrePaid credit card and simply mail that card to your receiver in the foreign nation. Once they have it you simply deposit money into that account here in the US and the person in the other nation goes to an ATM and withdraws it. They also could choose to use the card at any major merchant for purchases. Because these are withdraws and not wire transfers they are not taxed. This does not even touch on the ability of people to simply mail a check or cash to a loved one overseas. Before this law even goes into effect I would bet that some smart company located in another state will offer a service where someone can send money to them and they would resend it overseas, and they only need to charge a fee slightly less than the tax charged by Arizona to get a lot of business.

The government is going to severely hamper these money transferring businesses, while other methods will prosper. The government should not be in the business of picking winners and losers.

This bill would also make our state even more business unfriendly. We would pass the burden of collecting and tracking this tax onto local businesses. We also would harm businesses that import, have overseas offices or overseas workers, taxing the money that they pay. I for one have freelance web programmers in a handful of nations in Asia, this would cost me more to pay them. I also send money every month supporting kids in Christian schools in Asia, this would cost me more to do that. I have already been contacted by missionaries who receive support from Arizona who are shocked by this bill and hope that it will not pass. I have figured that this bill would cost me about $800 per year if it passes, and the rate of 5%, as has been published in the media, would be charged.

And that leads me to the next major problem in this bill, the fact that the actual rate of the tax is not set, we should not leave ANY tax rate up to the discretion of some unelected director to decide. Where is the oversight?

Because of the complexity of international money and other existing laws this simply is not a workable bill, and it will never generate the funds needed to build a complete fence.

I don’t like to speak unless I have a solution to the problem. I have an idea of a way to amend this law to make it actually achieve the advertised goal without creating a new tax and by only targeting illegal aliens. Basically you would strike this text and replace it with text that would create a law enforcement activity, stating that during the course of law enforcement activity if someone other than a victim was discovered to be an illegal alien they would have their real and personal property confiscated. This property would then be auctioned off to generate funds to build the fence. Some protection would need to be put in there to make sure that property of a business or citizen is not swept up. You could even expand it to include people who apply for social services but are found to be here illegally. Then once the fence is built and a maintenance fund established, extra funds would go to help pay for education. Such a bill would likely be about as popular as SB1070 was. It would also function as a great deterrent to an illegal committing a crime or asking for social services in Arizona.

Thank you for your time.

My take on Arizona’s HB2677

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If you have not heard there is a house bill that was introduced that will dramatically raise the cost of sending money internationally.  It is called HB2677.  It will tax everyone who sends money internationally with the intent to build a fence between Arizona and Mexico.   The problem with this bill is that it is a large new TAX.  They are going to use it for one of the favorite causes of the tea party, to build a border fence, but let’s not get suckered into that.  The tea party is first and foremost an anti-tax group, even if they will use the money for one of our favorite causes.   It is just a bribe, and I am shocked and dismayed that the leaders of the tea party have gotten behind this new tax.

The major problem with the bill is that it taxes “Any entity” that sends money overseas.  That means that the next time there is a natural disaster in some faraway place Arizona will have their hand out, take money from the poor and hurting who are in crisis.  I have heard from some sources that they want a 5% fee on all transfers.  The typical fee right now is about $3.50 for the first $500.  This would add $25 to that fee, an outrageous amount.

Another problem is that it is easily circumvented.  People who are smart will avoid this law by setting up intermediaries.  An example would be that someone would set up an office in Nevada, and have their offices in Arizona collect the money, send it to Nevada and then it would be wired from Nevada to the receiver.  They would do this for a fee but it will be well less than 5%.  People are smart and this would really reduce the amount that is collected.

This bill is designed to build a wall between us and Mexico, so I would be FOR this bill if they restricted it to only personal remittances to Mexico.  They may even include Central American nations if they like, but adding this tax to everyone who sends to any location is way too broad.

The key to success for Arizona is to be free to do business and this bill puts a transaction tax on any money sent out of the country from Arizona. The bill does not state the rate of the tax but I know the fence will be costly so it will likely be at least a few %. Most importers have very slim margins and such an added cost will make them flee our state to go to ones that don’t have this cost.

This punishes people like me who want to do nice things and send money overseas. This bill will dramatically increase the current cost of sending money. Right now I use Wells Fargo for most sends and it only costs $3.50 no matter how much I send. Sometimes I use MoneyGram and they charge $10 for the first $500. Even a 3% tax on these transfers would take money and food out of the hands of the people I try to help.   I also send all of this money to either Asia or Europe, and that has very little to do with a fence between us and Mexico.

I would be for this if they changed it to state that it would only effect personal wire transfers going to Mexico, or even Mexico plus central and South America. But this idea of doing it for all business, charity and personal wire transfers for the entire world is a crazy dumb tax that should not be passed.  I am shocked that someone as conservative as Judy Burges would put her name on this totally unfair and punitive tax.

Jason Dragon

Peoria South Tea Party Leader

Area Coordinator, PC and SC in the Republican Party in LD9.

Business Owner, Importer and Entrepreneur.

ALERT: I just posted a follow up to this CLICK HERE!

I’m Back Again.

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It has been a while, about 11 months, from the last blog entry.  I did this because I really needed a break.   I had posted a lot of stuff, but I started to feel that I was simply rehashing things that others had said, and that they said much better than me.  But this is no longer the case.  I have done a ton of reading, a ton of meeting with people in the interim.

For the last 8 months I even ran for office.  I ran for city council here in Peoria Arizona.  It was a hard fight but at the end of it all it turns out that people in this area much rather have big government than someone who will sit there and stop the goodie train like I would try to.  I ran for office because I wanted to make a change and simply being a leader in the Republican party was NOT enough.  I also am active in the Tea Party movement.  But after doing all of this I decided I wanted to do more, so I ran for office.  I basically put my life on hold.  It cost me about $2700 to run but the real cost was my distraction from my normal life, from the business I enjoy, the family I love and even from blogging.  I did learn a lot, and I got a new perspective on life.  All told I am glad that I did it, and looking back I made a few mistakes that if I had not made them I would have won.  I think the biggest mistake was being so openly Republican in an area that is mostly democrat.  The next biggest mistake was trusting people so quickly, and having these people become traitors and use the information I gave them in confidence against me.

But now that this is all over I am going to make life simple again.  Focus on making money, getting my thoughts together by blogging, focus on my family, and I will even try to get into shape.

Now here is a REAL president!!

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This is a new feature of my blog.  As with most people I know, many of my friends forward emails to me.  90% of them are useless but every now and then there is something very interesting in the email.  I don’t like to forward as a general rule, but I will take some of these select emails and post them here, on my blog.  This blog then goes out to my Facebook and many people get to read it.   Here is the first one…

About time we accept this attitude. We’ve had enough damage to this country by “Political Correctness”

America, Canada, all Europe ….. needs a President like this

Nowherei1
Prime Minister Kevin Rudd - Australia

During a very recent speech here are some points that PM Kevin Rudd made.


Muslims who want to live under Islamic Sharia law were told on Wednesday to get out of Australia, as the government targeted radicals in a bid to head off potential terror attacks.

Separately, Howard angered some Australian Muslims on Wednesday by saying he supported spy agencies monitoring the nation’s mosques.

Quote: ‘IMMIGRANTS, NOT AUSTRALIANS, MUST ADAPT. Take It Or Leave It. I am tired of this nation worrying about whether we are offending some individual or their culture. Since the terrorist attacks on Bali, we have experienced a surge in patriotism by the majority of Australians.’

‘This culture has been developed over two centuries of struggles, trials and victories by millions of men and women who have sought freedom. We speak mainly ENGLISH, not Spanish, Lebanese, Arabic, Chinese, Japanese, Russian, or any other language. Therefore, if you wish to become part of our society, Learn the Language!’

‘Most Australians believe in God. This is not some Christian, right wing, political push, but a fact, because Christian men and women, on Christian principles, founded this nation, and this is clearly documented. It is certainly appropriate to display it on the walls of our schools. If God offends you, then I suggest you consider another part of the world as your new home, because God is part of our culture.’

‘We will accept your beliefs, and will not question why. All we ask is that you accept ours, and live in harmony and peaceful enjoyment with us.’

‘This is OUR COUNTRY, OUR LAND, and OUR LIFESTYLE, and we will allow you every opportunity to enjoy all this. But once you are done complaining, whining, and griping about Our Flag, Our Pledge, Our Christian beliefs, or Our Way of Life, I highly encourage you take advantage of one other great Australian freedom, THE RIGHT TO LEAVE.’

‘If you aren’t happy here then LEAVE. We didn’t force you to come here. You asked to be here. So accept the country YOU accepted..’

Maybe if we circulate this , American citizens will find the backbone to start speaking and voicing the same truths.

Well, let the flames begin!   If you liked this post please use the buttons below to email it or put it on your Facebook also.

About time we accept this attitude. We’ve had enough damage to this country by “Political Correctness”

America, Canada, all Europe ….. needs a President like this

Prime Minister Kevin Rudd – Australia

Muslims who want to live under Islamic Sharia law were told on Wednesday to get out of Australia, as the government targeted radicals in a bid to head off potential terror attacks.

Separately, Howard angered some Australian Muslims on Wednesday by saying he supported spy agencies monitoring the nation’s mosques.

Quote: ‘IMMIGRANTS, NOT AUSTRALIANS, MUST ADAPT. Take It Or Leave It. I am tired of this nation worrying about whether we are offending some individual or their culture. Since the terrorist attacks on Bali, we have experienced a surge in patriotism by the majority of Australians.’

‘This culture has been developed over two centuries of struggles, trials and victories by millions of men and women who have sought freedom. We speak mainly ENGLISH, not Spanish, Lebanese, Arabic, Chinese, Japanese, Russian, or any other language. Therefore, if you wish to become part of our society, Learn the Language!’

‘Most Australians believe in God. This is not some Christian, right wing, political push, but a fact, because Christian men and women, on Christian principles, founded this nation, and this is clearly documented. It is certainly appropriate to display it on the walls of our schools. If God offends you, then I suggest you consider another part of the world as your new home, because God is part of our culture.’

‘We will accept your beliefs, and will not question why. All we ask is that you accept ours, and live in harmony and peaceful enjoyment with us.’

‘This is OUR COUNTRY, OUR LAND, and OUR LIFESTYLE, and we will allow you every opportunity to enjoy all this. But once you are done complaining, whining, and griping about Our Flag, Our Pledge, Our Christian beliefs, or Our Way of Life, I highly encourage you take advantage of one other great Australian freedom, THE RIGHT TO LEAVE.’

‘If you aren’t happy here then LEAVE. We didn’t force you to come here. You asked to be here. So accept the country YOU accepted..’

Maybe if we circulate this , American citizens will find the backbone to start speaking and voicing the same truths.

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Do you respect your money?

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The other day Adrian posted a great blog entry that really got me thinking.  His idea is that the number one most important lesson to be learned by people who want to be rich or be better off is not delayed gratification, not saving, and not any of those other things that all the books tell you.  Instead it is the concept of actually respecting your money.

moneyPlease read his blog, it is good, but I want to take it even farther.  I think that you respect for money is based mostly on what you learned from your parents.  When I say respect I mean that you value money, you value the stuff that you own that you bought with your money.  I have found that most rich people I know have a deep respect for money.  Some of the richest people I know watch where they spend.  They almost never throw anything away, they will have a sale first.  This is not being frugal, these people will invest in very expensive quality items that will give them long term enjoyment and even have a residual value.  They will buy things, but when they do they make sure that they get the best value.  They also think long term, and they look at the total cost of something, including the financing cost.

For years I have been in retail sales, owning my own computer company.  I have always had the hardest negotiation with those that were rich.  They would fight for every dollar to get the best deal, and I would give it to them.  But the people who could barely afford my services would never ask for a discount.  I have had friends who are always out of money, but they would ask me to go out to a restaurant with me and they would spend 2-3 times as much as I did.  I value my money, so I look for the best value when I spend it, at a restaurant that means usually having a coupon and usually I order one large item that will fill me up.  But most people order a smaller item, then the add on the salad, an appetizer and then if that is still not enough they add on dessert.  This same guy also had his car break down, it was going to be 400 to fix it, so he decided that it was time to get a newer car.  He found a car that was worth about $7000 and he bought it from a dealership that caters to people like him, he paid over $11,000 after he traded in his old one, and he agreed to 24% interest.  He did not need this car now, and I had connections he could had used to get it much cheaper BUT he needed it THAT DAY, he could not wait, and he paid the price for it.

Needing gratification now is the KEY that keeps most poor people poor.  Companies know this.  Car dealerships are told to get people to fall in love with the car then tell them that they need to buy it now to get that one.  One of the most profitable segments in our economy right now are the rent to own stores, just pay a bit now and you can take these new items home.  The typical price is about 350% the price you would pay if you just bought it at walmart today.

But the other most common trend among these people is that they never would think of starting their own business.  They usually don’t think about selling their old stuff, they simply give it away.  A friend of mine is in charge of cleaning up houses after they give their keys to the bank, and it is astounding how much stuff of great value they leave behind.  They leave furniture, toys, TV’s, computers, clothes lighting, and boxes and boxes of stuff.  Why did they not sell this stuff, and pay their mortgage…we will never know.

People that respect and value their money are able to live much much longer with out money.  A lot of people who own businesses now are also hurting, they have lost their business, they have lost their credit, yet almost all of them that I know are doing quite well, they manage to find money to pay the bills each month, they sell things, they dabble in freelancing for other companies, they do consulting, but the bottom line is that they do what they need to to keep afloat.  Then I know other people, who have never had that drive, and they sit at home all day playing video games, and they do nothing other than look for handouts.

This fundimental view of money does a lot more than effect our personal lives, it also shapes our nation.  Because the rich and poor spend money so differently they often scratch their head when they look at eachother.  When I had a lot of money, yet I would still buy things on sale, and I drove a modest SUV and such, many people wondered why I did not spend more, why I was also so “cheap”, it was not logical to them.  And then I look at them, and how much they spend when they have nothing and I can’t understand it, it is not logical to me.

To me and others the most frustrating part of people not respecting money is when it is your money that they are not respecting.  At this time our governments are spending money at record levels, our money, and they are doing it with very little respect.  They give money away, they waste money all over the place.  Right now they are spending our kids money, but soon they will start spending ours.  The plan to start taxing energy soon, and many other things.

So think about how much you respect you money.  I would love to hear what you think, please leave a comment.

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Is this the end of the credit markets again?

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The world as we know it is over, unless something drastic happens in the next 24 hours or so.  For the entire history of our nation business has been the engine that has spurned our growth.  And the engine of big business has been the ability to raise and borrow money.  This has been done by selling bonds, basically chunks of debt.

This is how corporations work.  A corporation is a business owned by the stockholders.  Most companies sell stock to raise money to start out with, this is called an IPO.  But after a while if you keep selling stock you dilute the amount that each person owns.  It is basically like taking on more and more partners in your company, meaning you own less, and you control less, and these partners share in the profits.  So most companies find it much cheaper to borrow money by selling bonds.  These stakeholders do not share in the profits or any upside in the company, but they also are the last to be hurt by and failure in the business.  As the business operates they also accumulate other debts, to vendors and to employees.  If a company fails it is just like a small business that fails.  The owner equity is wiped out first, the assets are sold and the bond holders get paid first and in full, and then if there is any money left over the other debts are paid.  Only after all of this is paid does the owner get anything.

In the history of large American business many companies have gone bankrupt, and it has always worked this way.  Almost every time the stock is wiped out.  Some companies survive by getting bought out, others simply restructure and are able to get out with little pain.  But here is the big change.  In recent times the government has gotten involved in being the largest bond holder of many companies, but the government does not look our for the best interest of US the tax payers, they don’t mind taking a loss.

Supreme Court ChryslerSee a few weeks ago Chrysler declared bankruptcy, and their stock was wiped out.  The company basically had three large creditors; The Government, the Union for future pension and health insurance payment, and the bond holders.  Lucky for Chrysler they found a buyer in Fiat for 35% of their restructured company, the problem is that this buyer is only willing to pay much less than what the company actually owes.  The Government is not really looking to get their money back so they are willing to take a major loss, the problem is that the Government used TARP money to invest in Chrysler and that was illegal, but that is a mute point now, they are just rolling over.  But the problem is that the Government and Obama have decided that the BULK of the money should go to the Union, heck Unions are the ones that put democrats in office.  So the Government decided to write the plan in such a way to pay only 29% of debt owed on the 42.5 million of debt of the bond holders, the people who should be first in line.  While the unions are getting 55% ownership in the new company, and the federal government is getting 10%.  A group of the bond holders spoke up and rightly said that they were not being treated right, that they should be first in line, not last.  The one Justice of the Supreme Court of the US saw it this way also and decided to stop the sale to Fiat under this current plan.   A huge amount of pressure came from the White House to allow the Fiat sale to go on, and the Court caved today and let it go on.

Now what this does is it creates a terrible precedent in US law that bond holders are no longer first.  This means that the people who invest get in bonds get none of the upside and much more of the downside risk, all for very little return.  This move will freeze the bond markets even more, in a time that we need them very much.  This also sets up the precedent for when GM finally gets done with their restructure.  The correct thing to do would be to wipe out the Unions.  These unions are the root cause for the failure of these companies.  Line workers start at more than $70 per hour in pay and benefits, many with tenure make well over $100 per hour.  And then they retire with a huge pension and a huge health care bill.   With such a high labor cost the average vehicle made by GM had over $7,000 in labor cost.  Newer, non-union plants owned by Nissan, Toyota and such have average labor costs per vehicle under $1,500.   So if GM wanted to make a vehicle for a cost of $20k (Sales price much higher), they would have much less money to work with to buy materials and make profits, in fact they have not made profits for many years, and now pay thousands per vehicle to cover their debt.  So if you spend only half that as your competition on the parts going into your product then your product can not be as good for the same price.  So during the 80’s and 90’s they just built a lower quality car, and recently they started building a much higher quality car, but at a much higher price.  In both situations it caused a steady march of customers away from these companies, and a vast loss in market share, making it even harder to do business.  The unions were like a boa constrictor, killing the company by squeezing tighter and tighter, but the Obama plan for GM is to give the unions over 90% of what they were promised, and they have taken no real concessions, not even a payout.  While the Government is willing to take only 60% of what GM owes the tax payers, and what about the bond holders.  Well they are going to get somewhere between 19% and 29% of what they are owed.  This is crazy really.  But this is payback to the unions for supporting the democrats, and a step into the much more socialist America that we find ourselves in.
If secured creditors keep loosing their rights then our capital markets will simply fall apart.  I was getting hopeful about our economy recently but this will really put a crimp on things.  It also does that help that the federal government needs to issue over $100 billion in bonds each month just to stay afloat with all the spending that is going on.  How much longer will people keep trusting in these bonds, when you see interest rates start to go up you will know that the trust is fading, and when that happens there will be even more trouble for us.

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Please don't send out stimulus checks…

Business, concepts, Entrepreneurship, Government, Investment, Money, Politics

The entire point of giving people money in the form of a stimulus is to get them to spend the money and actually stimulate the economy.  Many people have argued against the idea of giving people a stimulus check simply because most of the money will just be saved or used to pay down debt, things that don’t stimulate the economy.

I am not sure that having the government give away money is the best solution but it is what the current powers like.  So what is there was a way to basically force people to spend the money, I think that would work much better.  For all of the various stimulation that is planned it adds up to over $10,000 for every household in the US.  They mostly gave it to banks, and these banks did what was in their best interest, they saved it.  The government is trying to figure out a way to force the banks to lend out any new money they receive.  I predict that this will also fail.

The government knows it needs to spend money to stimulate the economy.  I think that this is correct.  They are planning on spending some money on some infrastructure projects, that is nice but not enough.  So they have the option of giving money to the banks or mailing out check.  Both options will not have a large effect.  So here is my idea.  DON’T give people check, and DON’T give the money to the banks.  Just simply change the format of the money, send out the stimulus in the form of Debit Cards.  This means that they have to spend the money, they can’t use the card to pay off their debts, they can’t save it because it will expire in 120 days.  Also the money will not go the massive hidden black market, they won’t gamble with it, they won’t spend it on drugs.  They will buy stuff with it.  This helps the legit businesses stay afloat, and they will pay taxes on the sales and profits.

This idea even has more benfitial effects.  First people with out bank account will be able to use it with out having to go to a check cashing store.  It also allows the government to track where the spending goes.

This is not a new idea.  I first heard about it because of a story about the stimulus in Hong Kong, they used this method and it wored really well.  After writing half of this blog I did a search for it and found out that Glenn Beck on CNN also talked about.  Even FEMA used debit cards to help the katrina evacuees.

Of course people may spend it on stupid things.  And I am sure some landlords will quickly figure out how to collect rent from a debit card, and of course some people will simply pay 3% and transfer the money to their PayPal account and then transfer it back to their checking account and use the cash, but the majority of people will simply spend it normally.

So the bottom line, is if we must be sending money out in bulk to the population then this is the best way to do it.  I still think that this is not an effective stimulus and really should not be done

The Auto Bailout…….my idea

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Well they have been talking for a while about trying to save the auto industry.  The problem is that people just stopped buying cars for obvious reasons, no money/no credit/focus on more important things.

The car companies are very far in debt, this is from loosing money for decades, mostly due to high legacy cost.  This means that they are paying billions each year to pay for health insurance and give money to people who no longer even work for the company.  They also pay more for the ones that work there.  All of this make is very hard for them to compete

Basically it all came down to the Unions, and they know that if they wait they will not need to give up nearly as much.  The car companies will be more desperate and they will have more friends in Washington come January.

So what is my idea.  Well the problem is not enough sales, so lets just fix that problem.   Give people “down-payment” assistance from the government.  Say $4,000 if you, your company or your local government buys a new car from the big three by the end of March or so.   And also get the government to buy cars, lots of them.  They could use them for police work, give them to cities that need them and give them to charities that need them.   If you put $4 billion, into the first plan that would move 1 million vehicles, resulting in about 30 billion of sales for the industry, reducing inventory and solving their main problem.  If the government purchased another $10 billion in vehicles, of course only from the big three, and divided up by 2007 market share, it would basically solve their crisis for the time being.  There would not be any messy loan that would not be repaid, and the government would solve this problem while getting something of value out of it.

The next step to help cut costs is to have the government make labor come to the table and renegotiate terms so that they are more like Toyota, Nissan or Honda, so that our big three can compete.  If we could to that and cut these costs we could save this thing.

Tell me what you think…please comment.

The SOLUTION to the mortgage mess!

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The other day I was watching the nightly local news like I usually do and they said that the city I work in was just given over 6.5 million dollars from the Federal Government that is earmarked to help stop foreclosure in the city.  This is a city of 400,000 and is in Arizona, the state with the third most foreclosures.  I figure the city of Glendale has had a bit under 1000 foreclosures this year.   (Yes we were the city that hosted the Super Bowl this year, if you were wondering.)  The thing that made this meeting pop out to the local media was the fact that the city council had NO idea what to do with the money so they were asking the General public to think of ideas and to go to the council meeting on Nov 25 to present their ideas.

For me this was a challenge.  I have been thinking about this for a long time, now there is a forum where I can actually be heard.  Very cool.  So I have been thinking about it for a week or so now, I will write down in this blog all of my ideas.
econdev_slideshow7

The federal government has mostly been focusing on the banks and helping them by buying bad loans or doing other things that really have not worked much so far.  For all this effort they have spent billions and the rate of foreclosure is still going up.  Some banks have stopped putting many clients info foreclosure simply because they can not afford the write downs.  The best hope of stopping it is really focusing on the people who are going into foreclosure.

Foreclosure happens for two main reasons.  The first reason is that a house is too far upside down, and the owner simply makes a business decision and walks away, willing to let the bank take the loss because then he does not have to. Many of the houses that fit into this reason are owned by investors who simply are making a business decision that is hurting all of us. There is little we can do in these cases, for these people it is simply a numbers game.  The best thing we can do is find a way to help this person sell this house through a short sale.  The best buyer may be the tenant that is currently living in the house.  As a city we could help these tenants with their down payment and get the bank to lower the amount of the loan enough so that their new payment will be the same or lower than what they have been paying in rent.

The second main reason for foreclosure is because the payments are more than the home owner can afford, this is either because the payments went up or the income went down.  There has been a lot of focus on loans that have “Adjusted” and spiked to a much higher payment amount, but only about half of foreclosures are this type.  In many cases the home owner has had a change in income from a business failure or job loss and can not afford the payments at this time.  Remember it only takes 90 days of missed payments to be put into foreclosure but it takes much longer to replace a job or a business.

So what is the solution?  It is in everyone’s best interest to avoid the foreclosure process and banks are very willing to work with customers that ask for help.  The best way to help people is to help them take action and to give them the tools to help themselves out of the situation.  I would propose that some of the money would be set aside to create an office where people can come to and help writing a hardship letter to their lender, this office would also give advise.  There would also be a city website where this information could be accessed.  This office could also hold seminars for the public and market these events.  All of this should cost well less than $250k per year to run.  Once a hardship letter is written most banks will apply 3 months of payments to the account and simply move them to the end of the term.  Also many banks are also willing to lower interest rates, reduce payment amounts and even reduce the total outstanding balance.  By writing these letters alone it could stop as much as 50% of the foreclosure in the city.

But then we need to go a step farther, I would propose that once the hardship letter is submitted that the city would help would help these people get a loan.  Most of these home owners are good hard working people and they will find a way out of their situation soon by either starting a new business, getting a job, or solving their problem another way.  By the time people pay late on their house they usually have already paid late on everything else and in our current system that means they can not get a loan to save their house.  Miss a few credit card payments, or a car payment, then get a bit behind on your mortgage the only loan you can get it either a short term payday loan or a credit card for $500 at 24% interest, and both of these help little to stop foreclosure.  The loan that these people need would be a line of credit that is easy to qualify for, has good terms and is long term so that they don’t need to worry much about it until after they have fixed their problems.  In most cases a loan in the amount of 10-15k would be enough to ensure that that household would not go into foreclosure.

Of course the City is not in the business of giving loans to its citizens.  But financial institutions are not willing to give loans to these people who need them the most because of lack of credit or income.  The solution is a guarantee by the city to pay these loans.  I think that the best idea would be to select one financial institution, that already has at least two offices in our city.  I would also go a step further and look for a locally owned institution.  It should also be a credit union because these non-profits give back to the community more than out of state banks do.  You then deposit $5,000,000 of the funds into a CD at the financial institution and make that the guarantee for the loans.  With long term, loans that are fairly easy to pay back the defaults could be quite low, well under 20%, and the financial institution could loan out 15 or even 25 million dollars and still not loose a penny on these loans because the first losses will be taken from the $5,000,000.  The financial institution also stands to gain because they will only have to pay 1-2% interest on the $5,000,000 but will receive 9% interest on the loans.  This interest will allow them to pay for the marketing and administration of the program while making a fair profit.  You should select the financial institution based upon the criteria above but mostly on how much they are willing to lend out to Glendale citizens once this $5 million security is in place. Most any financial institution would be willing to write 20 million or more in loans based on a government guarantee of covering the first 5 million in losses.

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So who should qualify for a loan? If we give out loans to the wrong people it will not be as effective.  Well the plan is to stop foreclosure in Glendale so they first would need to be a homeowner of a house located in Glendale.  Next they should actually live in the house, investors should simply do a short sell and give the house to the tenants.  Next they should be people who are at risk of default, people who are at least 60 days past due on their mortgage.  They also should be people who can not afford their payments, people with payments more than 40% of their household income.  Right now there are probably less than 2000 home owners in the city who meet all of these requirements, and if they all received loans for $10,000 it would total only $20 million.  There should be no check of credit history or income sources.  A credit check could be done but only used to establish that they are using a valid SSN and that they live in Glendale.

So what should the rules regarding this loan be? We should create a system that helps people stay in their house so this is what I suggest.  The loan can only be used for making mortgage payments, homeowners insurance payments, property tax payments, and to cover electrical bills and city service bills.  When the loan is originated the homeowner would provide a list of these companies.  Money can only be withdrawn by going to the financial institution and getting a cashiers check directly payable the company, or by using the financial institutions bill pay service.  The loan would be a line of credit with a set limit.  People could choose to pay down the loan at any time and even pay it off.   For the first 3 months there would be no payments required.  After that and for the first 3 years a payment of only 2% (Or $25, whatever is more) would be required.  After that the customer must pay 4% (Or $50 whatever is more) each month until it is paid off.  The homeowner would only be able to withdrawal for the first 2 years under this program.  Using this system all loans that are paid on time will be paid off in under 8 years from the date withdraws stop.  These loans would also have a clause that if the house is sold or refinanced some time in the future these loans would be paid off in full from that sale.  If a payment is made late there will only be a late payment fee equal to 10% of the missed payment amount or $10 whatever is more.  The customer would then have to make up this payment by paying extra on the next two months.  In the case of the first mortgage still going into foreclosure in the future this loan would be paid by the security (The $5,000,000).  If there are any clients who are more than 90 days past due then the minimum payments for these accounts will be paid for by the security until the homeowner starts paying again or until the loan is paid off.   The security would still retain the right to collect funds from any future refinance or sale of the property.  An added benefit for the homeowner would be the reporting of this larger loan on their credit reports, for most of them this could be the largest non mortgage they have and if they pay on time could give them a needed boost.

With such a system it will be easy for the financial institution to manage, easy for the client to get a remedy to their problem and it would be the best use of the governments money to help as many people as possible avoid foreclosure.  After 10 years the program will be over and there is a very good chance that the city will still have much of the $5 million left, allowing other programs to be done at that time.  This system will help between 1,500 and 2,500 household, a number higher than the amount of foreclosures in the past year, putting a stop to most avoidable foreclosures.  This is a total win win situation, the city win, the home owners win and even the financial institutions win with lower foreclosure rates and for our partner institution new customers and income from the loans.  We also must act fast because every day the situation is getting worse and our fix should not be kept on hold.

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Is it ok to steal?

Business, Computers, concepts, Government, Investment, Money, Politics, The World, , , , ,

I own a computer store.  It is fairly small and not so profitable recently.  In fact as our products have turned into a commodity it is very hard to make money any longer.  But there are other places that sell computers, CostCo, Dell, Best Buy. These companies are big, they make tons of money and are very rich.  They have tons of extra inventory just sitting there on their shelves.  Now if I went out and decided to take some of that inventory from their store and put it on my shelves, it would help my employees keep their jobs, it would help my store make more money this month and it would be totally illegal and immoral.  It is there stuff, I have no right to it.

But this is exactly what our government does but on a much grander scale.  In fact if you are the big store, and you don’t them steal from you Joe Biden calls you unPatriotic.  Yea if you are one of the people who will benifit from this plan I can see how you may support the Obama/Biden plan of taking more from the people who really make this economy work and giving it to the people who are middle class, or even those who choose not to work.

If you have any ethics you must see that this is simply another form of theft, the problem is that we have lived with it for about 63 years and people have become so used to it that they have become dependant on it.  If you make more than 120k per you, or maybe even less you should expect your taxes to quickly go up.  Obama says 250k in many speaches, 200k during his infomercial, and biden said 150k a few times last week, but now other written items from they say 120k.  Once he takes office, if he wins, I think it will quick drop to 100k or 75k.

On a side note Bush made some tempoary tax cuts that were fairly large and they expire in 2010.  When Obama says that he will not raise taxes to the middle and lower class he simply means that he will not add any new taxes BUT he is fully intending for the Bush tax cuts to be allowed to expire, in effect raising taxes, but HE did not do it….it has long been set in motion.   This slick concept is not caught by most people.

Social Security is the worst kind of theft.  It is a huge program that simply will NOT keep working much longer.  Basically you have a shrinking group of hard working young people who are mostly working pay check to pay check hardly getting by.  Then you have a growning group of older people who have had 40 years of high income earning, they mostly own a house and they have on average 10 times the assests of the first group.  Who should give who money.   Well, you guessed it, our government has it backwards, the hard working poorer working people give their money to the retired people who sit around and lead a life of leasure for the most part.  The worst part is that they feel entitled to this life because that is what they have been told for decades, it is illogical and is the main cause to our problems but there is little that can be done to fix it.