Chris Tomaras / Straight Talk / April 18, 2009

This week  we’ve had tea parties going on all over the country made up of disgruntled Americans calling out for President Obama to stop spending. It’s interesting to see reporters interview teenage kids protesting that they will end up being responsible for paying back all of the debt that is being incurred. Not exactly the reporters finest moment. While I don’t disagree with their premise I wonder how many of these kids truly have a clue as to what they are talking about and how many of these same young people were screaming out for change during the elections.

There are two things that seem to get Americans fired up. First is when we send young men and women off to war and second is when people lose their jobs and can’t afford to put food on the table.

The problem is that when all of the abuses relating to the housing market were occurring I didn’t see anybody protesting. Let me again reiterate the word abuses. Everybody was fat and happy with a job, plenty of income, their wealth increasing on paper with the value of homes being artificially inflated and the stock market going crazy. Yet what was going on was enormously destructive and in typical fashion, many are now reaping what they sowed and then whining about it after the fact.

We are in the midst of one of, if not the greatest economic catastrophes in the history of the entire world and we’re having tea parties. I have no problem with tea parties and standing up for what people believe in a respectful way but I’m sorry to say it’s a little late to be protesting after the fact.

So what do we do now? Well I’ve not been a proponent of massive spending programs to bail out the culprits who created this debacle but the country has elected a new President and a Democratic Congress who are now in charge of dealing with the problem so I guess spending and big government is our new way of life, at least until the next election. Maybe in the next election people will be looking for a different change. Does that mean we should stop protesting? Not at all.

The thing that makes it so difficult is that on one hand we have the political agendas between the two parties that have gone on for years and then we have a huge crisis that needs to be dealt with devoid of party politics in order for us to have a chance to survive economically.

The tea parties are being viewed as a Republican ploy against the Democrats and I think there is probably some truth to that, even though there are plenty of Democrats also disturbed about the massive spending that’s going on.

I listened to the President speak on several occasions over the past couple of weeks and I feel confident he understands exactly what has occurred that has led us to the painful position we are in. Where I differ with the President regarding the economy, is in his proposed solution but he’s so deeply invested at this point there’s probably no turning back.

The truth is that this is not a Republican or Democratic issue. This is a cultural issue derived from a spoiled, overindulgent society that has allowed the country to be overrun by greed and immorality. We never should have gotten to this point.

I’ve said on numerous occasions, it will be interesting to see what we will look like when we come out on the other side. We’re having tea parties protesting  government spending yet I don’t see anybody protesting things like the pornography and sexual improprieties that are taking over young people’s minds through the internet and on television. I don’t see anybody protesting the greed and manipulation by the banking system where they send out credit card approvals for young people just getting started in order to lock them into lifelong indebtedness and now they are raising existing card holder rates to at least 21% if not higher while borrowing from the Fed at 0%.

This past week I spent an inordinate amount of time securing our company’s website and email domain because there are unscrupulous people who buy them out from under you should they expire and then try and sell them back to you for a large sum of money. Unfortunately that happened to us. In our case it was someone in China. I don’t see anybody protesting against these same lowlifes that try and make an easy dollar taking advantage of honest people.  This is just another sign of the lack of ethics and common concern for one’s fellow man. It’s great that people are standing up for what they believe but why then are we not protesting the lack of integrity which should be making up the backbone of our country’s value system?

We  are living in a world of lies and deception where companies and individuals create formulas, products and different schemes to take advantage of consumers, all in the interest of making money. Welcome derivatives!

This week JP Morgan announced better than anticipated quarterly earnings due to trading profits. Does the average person understand what that means. What it means is that the bank employs professional traders who make bets on various markets. They use money that the Federal reserve is now lending them for nothing and they leverage it by buying and selling securities in order to make a profit. The larger the profit, the larger their bonuses. In essence they are professional gamblers. These same professional gamblers are some of the people that brought the country to its knees.

The banks have the latitude to do with their money what they would like. When cash is king and you  control  large sums of money and you can borrow for nothing, you can make huge profits taking advantage of others. Lending money to small businesses or to individuals looking to purchase a home is not nearly as lucrative as collecting 30% on credit card debt or purchasing securities in markets where you can dominate the pricing and then sell those same securities to unsophisticated investors at huge profit margins. And then you wonder why the banks are reporting better than expected earnings. Let me ask you, if you could borrow money for nothing and lend it out at 20 to 30% could you make money?

Congratulations to JP Morgan for their better than anticipated earnings at a time when so many Americans are deeply in need of jobs, housing, prescription drugs, food and money. The thing they don’t mention when announcing their earnings is how the recent reduced mark to market restrictions has helped to improve their earnings and what ugly unreported, off balance sheet assets their hiding in the closet. What I mean is that in the past they were required to price the assets on their books at current market levels. Now those rules have been relaxed so they are valuing  those same assets at higher than true market value in order to show increased earnings, at least the assets that they are willing to talk about.

This is the same case with Goldman Sachs, Wells Fargo and Citigroup who also showed better than anticipated earnings. Yet I have not seen a single person without high FICO scores, strong income and significant assets able to borrow one cent and it’s the same set of circumstances for small businesses.

So here’s the deal. Our current government is of the opinion that the only way to turn the economy around and get people back to work is to keep spending in order to get banks to lend. Well I continue to disagree because I do not think that the banks will lend for a long time unless it’s some sort of windfall situation or over-collateralized zero risk loan and as a result we cannot re-create an economy large enough to amass the vast amounts of wealth to pay back the country’s enormous debt.

The thinking is that, had the government let several of the major banks, insurance companies, Wall Street firms, FNMA and Freddie Mac and the automakers collapse, the combination of job losses and financial destruction would have exceeded the damage done by spending trillions of dollars attempting to bail them out. The purpose of the stimulus packages was to ease credit and make money available for loans. It’s just not going to happen. The bottom line is that the banks have a license to steal and the average American will not be participating in their success. This is a hard thing for average minds to understand and comprehend so people base their opinions on what they hear and who is the most convincing at the time. Well listen to what Fed Chmn. Bernanke had to say yesterday.

The Fed Chmn. said the collapse of U.S. lending will probably cause “long-lasting” damage to home prices, household wealth and borrowers’ credit scores. He said nothing about how many billions the banks are going to make in the process.

We see huge amounts of growing debt, no jobs, the residential housing market collapsing with the commercial market not far behind and we’re told it will get worse before it gets better. This week the owner of over 200 shopping malls across the U.S. has gone belly up. Imagine the trickle down from this bankruptcy. Then we’re told things are improving because GS, Wells Fargo, JP Morgan and Citigroup are increasing their earnings. So let me ask you this question. Since the big bank monopolies are making money has this done anything to help you get a job, help you sell or buy a home or put food on your table?

If we do not change our value system and begin standing up for what is stable, moral and ethical and we let big government, big business and radical minorities run our nation and influence our kids and grandkids by filling their minds with garbage under the guise of their unalienable rights, our faith-based democratic nation will never again see the light of day.

I just hope and pray that somewhere along the way we will open our eyes and direct our protests to the things that are really important before it is too late.

And that’s this week’s straight talk!