Our nation's AAA credit rating was just lowered to AA+ with a negative outlook.
Remember before proceeding in reading this post that I write for myself. I write and post to leave memories for my kids - and to chronicle things in my life that I want to remember. These are my opinions and my thoughts - and we will often disagree with each other -
I leave you entitled to your opinion(s) and I'm entitled to mine.
I haven't written a single word about the crazy weeks we've had as a nation awaiting our elected officials to extend the debt ceiling. Not a single word. But tonight, I break my silence. And I'm hugely pissed off - are you? - so feel free to just skip over this post. Seriously.
I think Congress just got their hands slapped by Standard & Poors - and I think it was deserved. They failed us. Totally and completely failed us. It's sort of ironic that S&P is one of the very same agencies that pushed all the bad debt on institutions for years. They helped banks write really bad loans based on nothing - and they are as much a cause of the problems as any one else. But let's just skip over that for now. They are still one of the top 'ratings agencies' in the world - and so what they think matters. The rest of the world will pay attention, even if others in our country say we should ignore it.
In part, S&P states they made the decision due to the refusal of the GOP to raise taxes. And for that, I applaud them. For me, the GOP - and the fringe Tea Party'ers - acted irresponsibly in regards to the debt ceiling. They took a routine, rote function - something that has been done before by President's and Congresses of every party affiliation - for generations. It was a no-brainer. Totally a non-event.
And it was turned into a huge event - because people think debt is bad. Making a huge issue that 'we can't take on more debt'.
I get that. We (as a family) think debt is bad. We avoid it at all costs. But we can't own a home without it. We can't own a car without it. There was a time in our early married life when we needed it for the things that happened in daily life that we didn't have the cash reserves to handle - car repairs, broken water heaters, home repairs, etc. I totally understand the economy as it is now has made 'debt' a dirty word - and families all over America are tightening their belts and working hard at living within their means. And that's a great thing. It's the right thing to do - these are scary times and many people are out of work - and when your income is less or you're afraid it might be less any minute, you tighten your belt. You stop spending. And you work really hard at not adding debt to your obligations. You can't afford it. Heck, some months you're in the red so much, you think 'holy crap, what are we going to do?'. And we are there some months ourselves. Certainly still above water overall and certainly blessed with two full time jobs. But I get it. I agree that spending more than you have - and going in to debt to support a life style you can't afford - is a bad thing.
But this debt ceiling crisis was stupid and ridiculous. We're not talking about a household budget here. You want to stop going out for pizza to shore up your personal household bottom line? Great. Do that. But when your budget is the budget of a country - and not just any country, but the US - the leading economy in the WORLD - you need to lighten up a bit. The time to decide to make an issue of the 'debt ceiling' and raising it is most certainly NOT during the worst economic crisis our country has experienced since the Great Depression. It was called THE GREAT DEPRESSION for a reason, you know. Economic events of this magnitude don't come about that often - thank God - which is why we are the leading economy of the WORLD.
I had breakfast with a friend yesterday. In 2008, she purchased her first home as a 'divorced' woman. She was proud of being able to qualify for that loan. Proud to put her difficult divorce behind her and do something on her own. Yesterday, she told me she is short-selling her home - she purchased it for $365,000 and it was recently appraised for $136,000. She's decided she's too close to retirement to keep paying on her $365K mortgage when she only has an asset valued at just slightly higher than a third of what she paid for it.
I did a Zillow search of my childhood home in Phoenix - and the 'red' for sale icons were so numerous, the screen was just a sea of red.
So here's what I think Congress should do.
Require the banks - who created the crisis at it's core by writing bad loans for people who couldn't afford the loan and who never would have qualified for the loan if due diligence had been in the vocabulary of banks during the early 2000's - require them to write off the money owed by Americans on homes that are no longer worth anywhere close to the loan balance. Apply this to absolutely every home in America - with no 'rules'. Everyone qualifies. No restrictions based on income or net worth. Just apply it to all - it's fair that way.
So, if you own a $20 million dollar home and have a loans against it based on that value (or a higher value - equity lines, home improvements like pools, etc.) and consequently mortgage/loan payment based on that loan amount, and it's now worth 1/2 that - fine. Your new mortgage is based on the new 'assessed' value of the property. The bank just lost $10 million - but that's not real 'value' anyway. They loaned money on a property that is now not worth that amount - and it's the banks that need to own the brunt of the loss. Apply that scenario to absolutely every mortgage in America, across the board. Just like that, my friends mortgage payment would go from $2500+ to $800ish....and she'd spend that $1700 difference. Well, OK - she'd save a lot of it - 'cuz she's close to retirement. But she would end up spending some of it - because as the economy started to recover (spending increases demand and demand creates jobs and jobs create growth), her confidence would return and she'd lighten up her savings and spend some. Maybe she'd take a vacation. She'd put money into the house - instead of not caring what happens to it. She'd visit Home Depot and buy some flowers for her garden every Spring...little things like that.
Remember before proceeding in reading this post that I write for myself. I write and post to leave memories for my kids - and to chronicle things in my life that I want to remember. These are my opinions and my thoughts - and we will often disagree with each other -
I leave you entitled to your opinion(s) and I'm entitled to mine.
I haven't written a single word about the crazy weeks we've had as a nation awaiting our elected officials to extend the debt ceiling. Not a single word. But tonight, I break my silence. And I'm hugely pissed off - are you? - so feel free to just skip over this post. Seriously.
I think Congress just got their hands slapped by Standard & Poors - and I think it was deserved. They failed us. Totally and completely failed us. It's sort of ironic that S&P is one of the very same agencies that pushed all the bad debt on institutions for years. They helped banks write really bad loans based on nothing - and they are as much a cause of the problems as any one else. But let's just skip over that for now. They are still one of the top 'ratings agencies' in the world - and so what they think matters. The rest of the world will pay attention, even if others in our country say we should ignore it.
In part, S&P states they made the decision due to the refusal of the GOP to raise taxes. And for that, I applaud them. For me, the GOP - and the fringe Tea Party'ers - acted irresponsibly in regards to the debt ceiling. They took a routine, rote function - something that has been done before by President's and Congresses of every party affiliation - for generations. It was a no-brainer. Totally a non-event.
And it was turned into a huge event - because people think debt is bad. Making a huge issue that 'we can't take on more debt'.
I get that. We (as a family) think debt is bad. We avoid it at all costs. But we can't own a home without it. We can't own a car without it. There was a time in our early married life when we needed it for the things that happened in daily life that we didn't have the cash reserves to handle - car repairs, broken water heaters, home repairs, etc. I totally understand the economy as it is now has made 'debt' a dirty word - and families all over America are tightening their belts and working hard at living within their means. And that's a great thing. It's the right thing to do - these are scary times and many people are out of work - and when your income is less or you're afraid it might be less any minute, you tighten your belt. You stop spending. And you work really hard at not adding debt to your obligations. You can't afford it. Heck, some months you're in the red so much, you think 'holy crap, what are we going to do?'. And we are there some months ourselves. Certainly still above water overall and certainly blessed with two full time jobs. But I get it. I agree that spending more than you have - and going in to debt to support a life style you can't afford - is a bad thing.
But this debt ceiling crisis was stupid and ridiculous. We're not talking about a household budget here. You want to stop going out for pizza to shore up your personal household bottom line? Great. Do that. But when your budget is the budget of a country - and not just any country, but the US - the leading economy in the WORLD - you need to lighten up a bit. The time to decide to make an issue of the 'debt ceiling' and raising it is most certainly NOT during the worst economic crisis our country has experienced since the Great Depression. It was called THE GREAT DEPRESSION for a reason, you know. Economic events of this magnitude don't come about that often - thank God - which is why we are the leading economy of the WORLD.
I had breakfast with a friend yesterday. In 2008, she purchased her first home as a 'divorced' woman. She was proud of being able to qualify for that loan. Proud to put her difficult divorce behind her and do something on her own. Yesterday, she told me she is short-selling her home - she purchased it for $365,000 and it was recently appraised for $136,000. She's decided she's too close to retirement to keep paying on her $365K mortgage when she only has an asset valued at just slightly higher than a third of what she paid for it.
I did a Zillow search of my childhood home in Phoenix - and the 'red' for sale icons were so numerous, the screen was just a sea of red.
So here's what I think Congress should do.
Require the banks - who created the crisis at it's core by writing bad loans for people who couldn't afford the loan and who never would have qualified for the loan if due diligence had been in the vocabulary of banks during the early 2000's - require them to write off the money owed by Americans on homes that are no longer worth anywhere close to the loan balance. Apply this to absolutely every home in America - with no 'rules'. Everyone qualifies. No restrictions based on income or net worth. Just apply it to all - it's fair that way.
So, if you own a $20 million dollar home and have a loans against it based on that value (or a higher value - equity lines, home improvements like pools, etc.) and consequently mortgage/loan payment based on that loan amount, and it's now worth 1/2 that - fine. Your new mortgage is based on the new 'assessed' value of the property. The bank just lost $10 million - but that's not real 'value' anyway. They loaned money on a property that is now not worth that amount - and it's the banks that need to own the brunt of the loss. Apply that scenario to absolutely every mortgage in America, across the board. Just like that, my friends mortgage payment would go from $2500+ to $800ish....and she'd spend that $1700 difference. Well, OK - she'd save a lot of it - 'cuz she's close to retirement. But she would end up spending some of it - because as the economy started to recover (spending increases demand and demand creates jobs and jobs create growth), her confidence would return and she'd lighten up her savings and spend some. Maybe she'd take a vacation. She'd put money into the house - instead of not caring what happens to it. She'd visit Home Depot and buy some flowers for her garden every Spring...little things like that.
Multiply that effect across every home in America - and there you go! Recovery - real recovery! - starts to happen.
We are underwater on our home debt and we have been for a few years. We don't worry about it - 'cuz we are both employed; we don't feel either of us are at risk of losing our jobs; and we have savings (well, we do - but God only knows what's going to happen Monday when the markets open) - so we'd take that difference and be very GOP-like - we'd pay down our debt with the 'extra'. And we'd splurge a bit more. Eat out a bit more. Travel some. Lighten the dirge of fear regarding our future by spending a little money. Paying down our debt as quickly as possible would result in us hopefully having no mortgage payment by the time we retire - so we'll have more money in retirement to stimulate the economy with. J. will play a lot of golf and we'll travel more. We will eat out and treat our kids and grand kids as often as possible to trips and meals. Hopefully help them buy their first homes, etc. All those dreams made possible by being able to stop paying on a loan for a property value that no longer exists.
'But what will happen to the banks?', you might ask. Well, as much as I'd like to say 'I don't give a rat's ass', I can't say that - because my husband is employed by one of the biggest and so I have to care. At least for four more years, anyway. Truthfully, I don't know what that answer would be. Many (more) would likely go under - and more consolidation/mergers would happen. But what would be left is entities that have loans on their books that are meaningful loans - with real value. 'Cuz right now, they have inflated loan balances (which are on their books as an asset at a hugely inflated amount vs. what the property backing those loans is actually worth) with un-real value. And that's just another shoe waiting to drop.
I told J. about my proposed solution - and he told me that there are many economists who say that is the best solution. Level the playing field and get the banks to be responsible for the devaluation of real estate all over the country. Sure, the second wave will hurt - but it won't hurt most Americans. It will hurt the banks. It will also open up home ownership again based on meaningful values and better underwriting to ensure those purchasing the home have a chance at keeping it! So I'm an economist and didn't know it!
If things don't improve, I can totally see more and more people making the decision my friend made - just walk away. If we suddenly were faced with only one income, we'd consider it - 'cuz we won't risk retirement savings to maintain our current standard of living. And I think if things don't turn around soon, more and more people all across America are just going to stop paying on those inflated loans.....live there for months while the banks force them out....and then move on. More cash in their pockets - and less in the banks.
Thanks to Standard & Poors, things are about to get a whole lot worse. I don't know what they think making this change will do - but I think they did it to make the point that our country's governance is a train wreck. I'm disappointed in all of them - including our President - though I totally think he had no choice but TO compromise. If the other party (or the 'other' other party) won't get the stick out of their asses and DO SOMETHING, then someone - and President Obama is a true leader and will lead even when others refuse to - someone has to do something.
It's infuriating how those people who refused to compromise - who refused to see that making billionaires pay their fair share instead of paying as little as most poor people pay (average tax rate for the very rich and corporations is 18%. What's yours?) was the best approach; combining increased revenue with reductions - are now blaming the President for the downgrade. Who do they think they're kidding? Do they really think we are that stupid? Are we?
I've learned a lot about leadership the past couple years. I don't consider myself a great leader by any means - but I'm learning. And one thing I know for sure about leading is that it isn't about being right or wrong. It's not about insisting your way is the only way. It is about compromising.....doing what's best for the whole vs. just some. Setting aside differences and seeing other perspectives - and making decisions based on those additional perspectives in conjunction with your own. And the most important thing absolutely required to lead is to put aside ego. Ego is poison to leadership. And most of our Congress doesn't want to lead - they want to rule. That's not leadership. And that's not America. That's not what they're elected to do. They are elected to serve - and to lead. It's time they start doing that.
The only thing I feel good about is that we have a true leader at the helm - and as hard as it is, I can't imagine where we'd be with previous leadership.
I'm glad my Monday will be a six hour meeting which will consume most of the day - so I won't have to be aware of what is happening in the market. I don't want to know until it's all over -
We are underwater on our home debt and we have been for a few years. We don't worry about it - 'cuz we are both employed; we don't feel either of us are at risk of losing our jobs; and we have savings (well, we do - but God only knows what's going to happen Monday when the markets open) - so we'd take that difference and be very GOP-like - we'd pay down our debt with the 'extra'. And we'd splurge a bit more. Eat out a bit more. Travel some. Lighten the dirge of fear regarding our future by spending a little money. Paying down our debt as quickly as possible would result in us hopefully having no mortgage payment by the time we retire - so we'll have more money in retirement to stimulate the economy with. J. will play a lot of golf and we'll travel more. We will eat out and treat our kids and grand kids as often as possible to trips and meals. Hopefully help them buy their first homes, etc. All those dreams made possible by being able to stop paying on a loan for a property value that no longer exists.
'But what will happen to the banks?', you might ask. Well, as much as I'd like to say 'I don't give a rat's ass', I can't say that - because my husband is employed by one of the biggest and so I have to care. At least for four more years, anyway. Truthfully, I don't know what that answer would be. Many (more) would likely go under - and more consolidation/mergers would happen. But what would be left is entities that have loans on their books that are meaningful loans - with real value. 'Cuz right now, they have inflated loan balances (which are on their books as an asset at a hugely inflated amount vs. what the property backing those loans is actually worth) with un-real value. And that's just another shoe waiting to drop.
I told J. about my proposed solution - and he told me that there are many economists who say that is the best solution. Level the playing field and get the banks to be responsible for the devaluation of real estate all over the country. Sure, the second wave will hurt - but it won't hurt most Americans. It will hurt the banks. It will also open up home ownership again based on meaningful values and better underwriting to ensure those purchasing the home have a chance at keeping it! So I'm an economist and didn't know it!
If things don't improve, I can totally see more and more people making the decision my friend made - just walk away. If we suddenly were faced with only one income, we'd consider it - 'cuz we won't risk retirement savings to maintain our current standard of living. And I think if things don't turn around soon, more and more people all across America are just going to stop paying on those inflated loans.....live there for months while the banks force them out....and then move on. More cash in their pockets - and less in the banks.
Thanks to Standard & Poors, things are about to get a whole lot worse. I don't know what they think making this change will do - but I think they did it to make the point that our country's governance is a train wreck. I'm disappointed in all of them - including our President - though I totally think he had no choice but TO compromise. If the other party (or the 'other' other party) won't get the stick out of their asses and DO SOMETHING, then someone - and President Obama is a true leader and will lead even when others refuse to - someone has to do something.
It's infuriating how those people who refused to compromise - who refused to see that making billionaires pay their fair share instead of paying as little as most poor people pay (average tax rate for the very rich and corporations is 18%. What's yours?) was the best approach; combining increased revenue with reductions - are now blaming the President for the downgrade. Who do they think they're kidding? Do they really think we are that stupid? Are we?
I've learned a lot about leadership the past couple years. I don't consider myself a great leader by any means - but I'm learning. And one thing I know for sure about leading is that it isn't about being right or wrong. It's not about insisting your way is the only way. It is about compromising.....doing what's best for the whole vs. just some. Setting aside differences and seeing other perspectives - and making decisions based on those additional perspectives in conjunction with your own. And the most important thing absolutely required to lead is to put aside ego. Ego is poison to leadership. And most of our Congress doesn't want to lead - they want to rule. That's not leadership. And that's not America. That's not what they're elected to do. They are elected to serve - and to lead. It's time they start doing that.
The only thing I feel good about is that we have a true leader at the helm - and as hard as it is, I can't imagine where we'd be with previous leadership.
I'm glad my Monday will be a six hour meeting which will consume most of the day - so I won't have to be aware of what is happening in the market. I don't want to know until it's all over -
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