Let's Talk Bain Capital

[Guest]

Does anyone really know how a private equity firm actually works? I do. And it's absolutely clear that self-serving and stupid people like Rick Perry, Sarah Palin, Newt Gingrich and others who are criticizing Mitt Romney for "vulture capitalism" do not. Similar unfounded criticism will likely come from the Democrats this fall.

Just a few points to consider...
Private equity firms invest not only their own money and personal funds of their partners, but also money provided to them by other investors such as insurance companies, pension funds, and other private investors. Those firms invest with Bain because of the Bain's record of producing above average rates of return on invested capital.
Private equity firms invest in companies. Once they buy them, they work with the management of the companies to increase profits and thereby the value of the company. They do not either create or invest in the types of exotic financial derivatives that contributed so greatly to the current financial crisis. If anything, like the public, the businesses they own have also suffered as the result of the use of those types of financial products.

Investments are only made after significant due diligence and financial modeling, often utilizing the services of expert legal and business consultants, and even then only after multiple levels of investment committee study and approval. Any investment made by a private equity firm almost certainly is vetted by many people, probably multiple times.
Firms like Bain hire extremely smart and experienced people as their partners and professional staff. The firm probably chooses to consider and perform due diligence on only 10% of the investment opportunities presented to it, and then really invest in maybe 10% of those that they choose to study. That means they find only about 1 out of 100 investment opportunities worthy of an investment.

Private equity firms never…repeat NEVER…invest in a company in which their purpose is liquidation and sale of the company's assets. They often use a technique wherein they break up a company into its parts and sell various divisions to other buyers. Sometimes they may shut down an underperforming division or business if they find there is little chance that business can continue as a going concern. That strategy is known as "the individual parts of a company are worth more than the company as a whole". But a private equity investor never buys a company for the sole purpose of liquidating it.

Do private equity firms ever purposely shut down divisions or parts of companies they buy, thereby laying off workers? Certainly. But they do that in order to make the parts of the company that remain stronger and more capable of generating and growing proifits, making the company more valuable.

Do private equity firms ever make bad investment decisions and find it necessary to close and liquidate a company they own, laying off all its employees? Sure that happens. Sometimes that becomes necessary when it becomes apparent that it would be imprudent to continue to invest in a company that has little chance of surviving. When that happens, typically the private equity firm loses its investment. That makes the firm, its investing partners and the banks that have lent them money very unhappy. In fact, if that were to happen too often, the private equity firm would be unable to raise additional investment capital or borrow the necessary parts of it's capitalization from banks, insurnce companies or other lenders.

How did Bain Capital do as an investment firm? They produced exemplary results. They have an admirable record. When Mitt Romney says that in his tenure as Bain's CEO that over 100,000 new jobs were created within the companies they owned, I would tend to believe it. It's unlikely we'll ever see a complete accounting of employment gains and layoffs over Romney's 25 years as CEO. "Private equity" really is private and their financial results and statistics will likely never be made public.
While some of the companies Bain invested in failed and had to be closed down and liquidated, Bain had a sufficient number of the companies they purchased perform as "home runs", growing in size, sales, profits and employment to produce above average rates of return on their investments. Bain's average return on investment was very, very attractive and sufficient to have investors provide them with hundreds of millions of new dollars to invest.
What it boils down to is that over a long period of time--the entire time that Mitt Romney served as Bain Capital's chairman--the firm achieved extraordinary rates of return on their investments, bridging various up and down periods in the economy, managing the companies they owned with deftness and skill. When people like Rick Perry, Sarah Palin or Newt Gingrich accuse Bain and Romney of "vulture capitalism", all they are doing is making ludicrous statements demonstrating their own stupidity. When the time comes that the Democrats make similar criticisms, they too can be accused of the same disingenuous stupidity.

There probably is no purer form of capitalism than the private equity business. Those that assert otherwise might claim to be conservatives committed to capitalism, but their statements suggest they don't have a clue what they're talking about.

[Guest]

VK, You have done an excellent job of explaining venture capitalism. It's focus is on the creation of value not destruction. People have confused crooks and con men such as Bernie Madoff with venture capitalists. This has been promoted by our 'sound bite' news coverage and movies such as 'Barbarians at the Gate'.

Perry, Gingrich, Palin etc. have deliberately confused the issue for their own benefit. This is not only disingenuous but damaging to this nation and its future economic success.

[Guest]

Well done.

The companies like Bain bring in people who will do what ever it takes to make a good business out of problem or distressed businesses.

They do what previous management/ownership either would not do, or could not do or were simply incapable of doing, hence the reason for the problem/distress.

The process is exactly why/how Jack Welch earned the name 'neutron jack'.

btk

[Guest]

...The process is exactly why/how Jack Welch earned the name 'neutron Jack'...Exactly right, Billie.

By the way, has Rick Perry completely forgotten that he was in exactly the same "investment business" that he now criticizes Mitt Romney for? Perry created two state-sponsored investment funds, the Texas Enterprise Fund and the Texas Emerging Technologies Fund. His record in using those pools of money--money which came from the taxpayers of Texas--was considerably less skillful and had much worse results than Bain Capital. Perry even oversaw one of Texas' larger investments from these funds, a large investment in Countrywide Financial, the mortgage company that went bust and had to be liquidated and sold to Bank of America, losing the complete investment of taxpayer money.

Now he's criticizing Romney for vulture capitalism? Here, read this...

http://www.washingtonpost.com/blogs/fact-checker/post/gov-perrys-shaky-defense-of-texas-investment-funds/2011/10/13/gIQAVEkViL_blog.html

Why doesn't someone ask Perry why, as the kettle, he has any right to call Romney's pot black?

[Guest]

Thank you VK,

I knew generally what they did and how the did it but this fills in some blanks.

Frankly I am about sick of the "Vulture Politics" going on right now. It is like the GOP candidates work for the Obama campaign!
EB

[Guest]

yes, i think newt gingrich regrets taking this tack and it may have been a fatal error. up to then he had a clean and positive message...since then i think rick santorum has only gained momentum among conservatives...we respect romney and will support him if he is the candidate, but we are still hoping to have a true conservative in the white house...thanks kahuna for a very good economics treatise.

[Guest]

Nicely done VK.

[Guest]

Thank you for explaining "There probably is no purer form of capitalism than the private equity business."

[Guest]

Very nice post VK. Where are all the liberals opinion? Not one negative post.

[Guest]

I had an inkling but got quite an education in various articles published recently in WSJ and then by surfing the net. While their only motive is profit and not an ounce of altruism, in the long run these firms are a benefit to our economy.

However I can understand why some people refer to equity firms as vultures. Because in essence they do serve in a number of cases in the same manner as vultures in the wild. Clearly some of these equity firms operate solely to buy companies at a bargain just to sell off the assets, etc and make a quick profit much the way people flip houses in the residential market.

Further, you would be inclined to view it that way had you been one of those caught up in one of these eating machine. Captialism, like stocks bonds and commodities need winners and losers. You love it if you win and not so much if you lose.

Then you add into this mix the business mannerism/philosophy of a private equity firm and you may leave some folks hating you more.

So I can see but perhaps may not agree why some folks would cast a shadow over Bain Capital.

I am pleased this issue is out there now. I hope for the Republican sake romney can address this issue with honesty and clarity and positivity.

[Guest]

Very nice post VK. Where are all the liberals opinion? Not one negative post.

This is way over most voter's heads, but most voters know somebody who lost their job because the company was bought out or jobs were shipped overseas. Governor Romney is the .001% and President Obama is fighting for the 99%.

[Guest]

janmcn,

Governor Romney is the .001% and President Obama is fighting for the 99%.


Really, Is that why Pres. Obama takes advantage of every opportunity to tell use how rich he is and how he should pay more taxes? I don't want to hear how rich he is, I guess it is important to him.
It looks like being Pres. has been pretty good for his bottom line.
So how is Obama fighting for the 99%? By making energy prices skyrocket? By creating Soooooooo....many jobs?
By getting them health care, sometime down the road? And do 99% of us need Obama care?

Really? I think that you are still wearing your hope and change t-shirt.

Weak, I think!

[Guest]

janmcn,




Really, Is that why Pres. Obama takes advantage of every opportunity to tell use how rich he is and how he should pay more taxes? I don't want to hear how rich he is, I guess it is important to him.
It looks like being Pres. has been pretty good for his bottom line.
So how is Obama fighting for the 99%? By making energy prices skyrocket? By creating Soooooooo....many jobs?
By getting them health care, sometime down the road? And do 99% of us need Obama care?

Really? I think that you are still wearing your hope and change t-shirt.

Weak, I think!
If you check the facts you'll find that most of President Obama's "wealth" comes from books he wrote before he became president in addition to his $400,000 annual income as president.

President Obama is fighting for the 99% by lowering taxes, saving the auto industry, having a jobs bill (that the republicans will not pass), passing financial reform, trying to save medicare, medicaid, and social security, passing the Affordable Care Act, and creating the Consumer Protection Agency.

If you check, you'll find that President Obama releases his tax return every year. When is Governor Romney going to release his tax return? After he returns all his off-shore money? I'm guessing we'll eventually find out that Romney pays very little tax on a great deal of money.

[Guest]

then we would see him as just another who has enough money to have consultations of how to skate on the thin ice of legal or not. Nothing different than Jeff Imelt, CEO of General Electric has all the resources of a mega billion dollar company whose recommendations result in GE paying no taxes in 2010.

Jeff Imelt who is chairman of the business mes coucil for "JOBS" who reports to Obama.

The same Imelt who transferred a large chunk of medical systems from the USA to China this past year.

So please do not single a wealthy person like Romney who has the resources to take advantage of the laws and opportunities for personal exploitation at the cost to the tax payers. Just like each and every other wealthy person in Washington DC.

I am not advocating it is OK or acceptable. Merely pointing out that Romney is not an isolated case.

So let's do away with the distractions and the red herrings and focus on who can do the job.

btk

[Guest]

I am sure that he has not made anything extra being president. Not.
What I am saying is that he can't stop talking about how rich he is. Kinda sounds like Trump sometimes!
As far as the Affordable Care Act, Do you really think that government can make something MORE affordable, Wow!

Tax cuts, Do you mean extending THE BUSH TAX CUTS?

How is he saving medicare, medicaid, and social security?
What has he done? What has either side done?

As far as the Consumer Protection Agency, do we really need or can we afford another agency?

I didn't say anything about tax returns but if you are implying that he or his administration is more transparent than other presidents or presidential hopefuls, BS!
If Romney is taking advantage of legal tax loop holes then what is the problem? Is he breaking the law?

I guess we see it very different.

[Guest]

I am sure that he has not made anything extra being president. Not.
What I am saying is that he can't stop talking about how rich he is. Kinda sounds like Trump sometimes!
As far as the Affordable Care Act, Do you really think that government can make something MORE affordable, Wow!

Tax cuts, Do you mean extending THE BUSH TAX CUTS?

How is he saving medicare, medicaid, and social security?
What has he done? What has either side done?

As far as the Consumer Protection Agency, do we really need or can we afford another agency?

I didn't say anything about tax returns but if you are implying that he or his administration is more transparent than other presidents or presidential hopefuls, BS!
If Romney is taking advantage of legal tax loop holes then what is the problem? Is he breaking the law?

I guess we see it very different.

I'm sure all that extra income President Obama is making while president will show up on his tax return for all the world to see.

Donald Trump, Mitt Romney, George W Bush all had inherited wealth. Isn't it nice to see somebody make it on their own? Isn't that the American dream?

The Affordable Care Act helps seniors pay for their meds, helps young people by keeping them on their parent's health plans, allows people with pre-existing conditions get healthcare.

The tax cuts I'm talking about are the payroll tax cuts which puts about $1000 annually in people's pockets. Obama is saving medicare and medicaid by not endorsing the Paul Ryan plan which would end these programs as we know them.

The Consumer Protection Act speaks for itself. Should we go back to 2008 and let the banks just run roughshod over the economy?

I'm not implying that Obama is being more transparent or that Romney can't take advantage of legal loopholes as long as he makes them public for all the world to see.

[Guest]

then we would see him as just another who has enough money to have consultations of how to skate on the thin ice of legal or not. Nothing different than Jeff Imelt, CEO of General Electric has all the resources of a mega billion dollar company whose recommendations result in GE paying no taxes in 2010.

Jeff Imelt who is chairman of the business mes coucil for "JOBS" who reports to Obama.

The same Imelt who transferred a large chunk of medical systems from the USA to China this past year.

So please do not single a wealthy person like Romney who has the resources to take advantage of the laws and opportunities for personal exploitation at the cost to the tax payers. Just like each and every other wealthy person in Washington DC.

I am not advocating it is OK or acceptable. Merely pointing out that Romney is not an isolated case.

So let's do away with the distractions and the red herrings and focus on who can do the job.

btk

Jeff Imelt is not running for president. Mitt Romney can take advantage of all the laws and opportunities available to him, as long as he releases his tax returns and makes it all transparent.

[Guest]

This is way over most voter's heads, but most voters know somebody who lost their job because the company was bought out or jobs were shipped overseas. Governor Romney is the .001% and President Obama is fighting for the 99%.

Bull. How many jobs has Obama prevented from "being shipped overseas"???

Like this deal headed by his pal, G.E. CEO Jeffrey Immelt and Obama's "Jobs Czar"???

Wednesday, September 8, 2010; 9:48 PM

WINCHESTER, VA. - The last major GE factory making ordinary incandescent light bulbs in the United States is closing this month, marking a small, sad exit for a product and company that can trace their roots to Thomas Alva Edison's innovations in the 1870s.

The remaining 200 workers at the plant here will lose their jobs.

"Now what're we going to do?" said Toby Savolainen, 49, who like many others worked for decades at the factory, making bulbs now deemed wasteful......

...What made the plant here vulnerable is, in part, a 2007 energy conservation measure passed by Congress that set standards essentially banning ordinary incandescents by 2014. The law will force millions of American households to switch to more efficient bulbs.

The resulting savings in energy and greenhouse-gas emissions are expected to be immense. But the move also had unintended consequences.

Rather than setting off a boom in the U.S. manufacture of replacement lights, the leading replacement lights are compact fluorescents, or CFLs, which are made almost entirely overseas, mostly in China.

Consisting of glass tubes twisted into a spiral, they require more hand labor, which is cheaper there. So though they were first developed by American engineers in the 1970s, none of the major brands make CFLs in the United States....

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/07/AR2010090706933.html?sid=ST2011013003428

[Guest]

Donald Trump, Mitt Romney, George W Bush all had inherited wealth. Isn't it nice to see somebody make it on their own? Isn't that the American dream?

Yeah, so Obama can confiscate it and spread it around equally! What is wrong with the mothers and fathers of these people making the money and leaving it to their families so their life will be better. I think THAT is the American dream, not everybody having to start over because someone like Obama thinks it belongs to everybody!
I think small business people want the American dream, the same people that are under attack by Obama.

If you want to control what banks do then pass a law not create an agency and staff it with hundreds of people that we can not afford. If they are breaking the law then arrest them if not then pass a law and then arrest them.

I don't think we needed to pass the Obama care Act to get this. Why not identify these people and help them instead of changing everything and in the end costing us all much more in the long run. If you think it will not cost more then you are not thinking.

Payroll tax cut is a joke. Max $1000 to those that need it least and next to nothing for those that need it most. Oh and for a whole 3 months, wow! what a champion for the poor and middle class!

I am sure that before it is over Romney will release his tax returns and half will love it and half will hate it.

[Guest]

As far as the Consumer Protection Agency, do we really need or can we afford another agency?


Since no other agency seems to have, as it's charter, protecting the people from business avarice then, yes, we need one.

An example of what we need to be protected from.

You are having trouble making ends meet. You prioritize your bills. You pay the rent/mortgage first because they're most important and you pay as many as you can down the list.

Now, one of the last on your list doesn't get paid. Maybe it's a $20 payment you just plain didn't have.

Someone "higher up on the list" sees this in your credit report and suddenly jacks your interest rate up from somewhere in the teens to 29%. It doesn't matter that you paid THEM on time and followed THEIR rules.

Now, suppose the creditor who did that wasn't a credit card company but was the institution holding your car loan or mortgage.

Do you think that's fair?

If I'm late on a car or mortgage payment, I pay that penalty. Being late on some store credit card because someone ELSE bounced a check to me (this happened to me some years ago) should only affect my relationship with that store and, at worst, be reflected on my credit rating for FUTURE considerations.

[Guest]

I thought I read a post concerning the auto bailout. As you recall Obama not only bailed them out he ignored bondholders rights of claim and turned them over to the unions. Popular yes. Legal very questionable. Anti-capitalist most definitely. Private Equity firms are entitled to residuals and fall in line of payment after supplier, creditors, lenders, Treasury and employees are paid.

The attacks on Romney concerning Bain Capital are very misleading and clearly in the genre of far left. Capitalism lays the foundation for our liberty, and our economic freedoms and without it we will drift into a socialistic state. Be wary of those who make claim that capitalism is immoral look careful to whom they are and why they are making those claims. and then ask yourself what are these critics suggesting in its place?

Also mention was the Consumer Financial Fraud Act again while populist propaganda this very complex act will do more harm to our economic way of life creating in the same manner as ObamaCare the ability of government to control our private lives. Clearly the intent of this Act is to protect consumers but its demands create multiple agencies and red tape that will figurately stangle corporations and send them broke. The Sarbines Oxley Act was an over reaction to Enron, etc. Numerous businesses went bankrput and or move their companies overseas to avoid this costly regulation. Consumer financial Fraud Act is Sarbanes Oxley on steroids.

I am not suggesting that we should demand the abolishment of this Act but clearly it needs revisions because economic growth simply cannot flourish under its demands

[Guest]

You are having trouble making ends meet. You prioritize your bills. You pay the rent/mortgage first because they're most important and you pay as many as you can down the list.

Now, one of the last on your list doesn't get paid. Maybe it's a $20 payment you just plain didn't have.

Someone "higher up on the list" sees this in your credit report and suddenly jacks your interest rate up from somewhere in the teens to 29%. It doesn't matter that you paid THEM on time and followed THEIR rules.

Now, suppose the creditor who did that wasn't a credit card company but was the institution holding your car loan or mortgage.

Do you think that's fair?

If I'm late on a car or mortgage payment, I pay that penalty. Being late on some store credit card because someone ELSE bounced a check to me (this happened to me some years ago) should only affect my relationship with that store and, at worst, be reflected on my credit rating for FUTURE considerations.
__________________


Here's a novel idea, heartless as it may sound, LIVE WITH IN YOUR MEANS and then you would not have most of these problems. I know it is radical but so was the hope and change bull of the last 3 years.

If you can't pay, don't buy!

[Guest]

Here's a novel idea, heartless as it may sound, LIVE WITH IN YOUR MEANS and then you would not have most of these problems. I know it is radical but so was the hope and change bull of the last 3 years.

If you can't pay, don't buy!

Amen.

Debt is another form of slavery. "Who owns your debt owns you."

[Guest]

Here's a novel idea, heartless as it may sound, LIVE WITH IN YOUR MEANS and then you would not have most of these problems. I know it is radical but so was the hope and change bull of the last 3 years.

If you can't pay, don't buy!

Does this also pertain to the two unpaid wars, the tax cuts enacted in 2001 and 2003, and medicare part D, all unpaid for when enacted?

[Guest]

I think what some of you either forget or conveniently don't remember or don't know!!

The issue is not whether there is money to spend for wars or anything else that is for the good of the USA....the issue is the billions of special interest, lobbyist and congressmen favorites that are, when all get said and done, DISCRETIONARY.

There is in fact out of control spending and ABSOLUTELY NOTHING is being done about it. I don't think the same folks in the categories above understand we are borrowing 40 cents on every dollar spent on programs.

Forget the D and R crap.....go after the politicians that are spending like the is no tomorrow. Obama wants another trillion dollars....$400,000,000,000 will be borrowed. If he were a leader he would draw the line and say enough is enough....that would mean cutting programs and that would translate into potential voting block loss....therefore...business as usual in Washington and we the people continue to sit idly by as the good ship USA follows the same course as the Titantic and we the people are merrily dancing to the fiddling....just outright stupid both R and D.

btk

btk

[Guest]

Does this also pertain to the two unpaid wars, the tax cuts enacted in 2001 and 2003, and medicare part D, all unpaid for when enacted?

Yes it does. Why shouldn't our government live with in it's means.
But instead the government that can't pay it's bills is creating a new agency, that needs to be funded, to help people out that have never learned how money works.
They think it comes in a little plastic card or other people earn it so the government can take it and give it to them.
They buy houses they can't afford, phones to talk to people at every hour of the day, instead of working (WSO)
and cars that they think make it look like they got it made.
They then get mad when someone they have entered into a contract with wan them to PAY what they owe! Oh my God! How dare the mean old business for doing that.
Lets get a new agency to stop that right now.

And as far as who in government got us here? All of them, all three kinds. Right, left and middle! And I might add, US. We put the idiots in there and put our heads down and went back to work. When we looked up we has Bush, Obama and the mess we have now.
If you think Obama has anything to do with the solution to this problem then you are part of the problem.
He had control of all three branches and barely got Obama care through, and that was done "shady" at best.
EB
Until we clear all of them out and send people who have a grasp on reality, we are screwed!

[Guest]

But instead the government that can't pay it's bills is creating a new agency, that needs to be funded, to help people out that have never learned how money works.
They think it comes in a little plastic card or other people earn it so the government can take it and give it to them.


This is where you don't know what you're talking about.

Let me educate you about a situation in THE REAL WORLD. And I say this because it happened to ME.

I was unemployed. It was the worst bout of unemployment I'd ever had.

I managed to keep paying my bills. I cut back a LOT - and the fact that I wasn't commuting to work helped. I had unemployment but also cashed in a lot of savings to keep things going. Yes, I had a few credit cards.

I made my payments on EVERY ONE of those cards ON TIME. Sure, I wasn't paying as much as I would have liked, but it was ALWAYS above the minimum.

Lo and behold, someone claims I owe them money. It's a bogus claim but now I have to go out of my way to fight it. For a while, this shows up on my credit report (It was a while before I found out about these thieves).

How did I find out? Because the minimum payment on my credit card with the largest bill DOUBLED and my interest rate was hiked by over A THIRD. Nturally I called to ask them what happened and that's when I found out about the bogus bill.

It took me seemingly forever to get that damn thing off my record. A friend of mine who was laid off form the same firm that laid me off had something similar happen to him BECAUSE HE LOST HIS JOB - he made all his payments on time and they jacked HIM up becuase they were afraid that he would fall behind (which he never did).

It took longer still to get my credit card company to "put things right" and even then they said they only did it because I'd been such a good customer for over 10 years (never so much as a day late on a payment).

When a bank says "It doesn't matter if you do everything we ask you to do, we can change the rules of the game and move the goalposts any time we want" - THAT is WRONG.

When a bank deliberately re-sorts your transactions so that the deposit you made IN CASH IN THE MORNING doesn't take effect until AFTER the check you wrote LATER THAT DAY - THAT is WRONG (and that happened to my wife - they actually put a HOLD on a CASH deposit done IN PERSON at the branch office)

It is also why I deal with credit unions. When there was a mixup with my mortgage payment, it took all of TEN BLEEPING MINUTES with a REAL LIVE PERSON to get it cleared up. ...and guess where my wife moved her accounts after the incident I mentioned above (we were dating at the time).

Of course not everyone who is victimized by banks is as innocent. When you sign up for those "no interest" deals, it's there in the now-not-so-fine print (thanks to new laws) telling you that you still ahve to make payments and that the accrued interest can sock you if you miss one. Me? I've never had to pay the accrued interest.

[Guest]

This is where you don't know what you're talking about.

Let me educate you about a situation in THE REAL WORLD.

This is where either I failed to make my point or you don't know what you are talking about.

My point is, and your situation is what I am talking about, that you decided to buy lots of stuff. Maybe you needed it or thought you needed it. You borrowed money, used credit cards or what ever finacial device to get the money and the thing.
You then lost your ability to pay for it. Something many people either don't think about or plan for. It may not be your fault you lost your job but it is something one must think about. That is why I started my own business, I am last to go!
I do know what I am talking about because I came from dirt poor. Not just poor but "no shoes" poor. I have lost jobs and income. I also decided if I needed something I saved for it. I only use my credit cards for things that you have to have one one for like car rental and hotels, not to buy things with.

I bought only what I had money for not what I thought I deserved. Yeah, lots of people are hurting and it is not Obama that got us there. He just has not done anything to get us out.

But back to me not knowing what I am talking about.
So many people think you have to own a home or a new car or the latest smart phone, biggest TV and they go out and get it. It is so easy. Then when the fantacy world they live in crumbles it is the fault of the person who lent them the money or sold them the product on credit that is unfair.
Well I bet most people could not even tell you one thing on the credit card agreement forms or even mortgage papers. They just sign and hope!

I am sure you did all you could do after this happened to you. What I am saying is more could have been done before it happened, like don't buy on credit unless maybe a home and then only if you CAN AFFORD IT!

Drive a used car, use a phone that does not have the capability to fly the space shuttle, maybe buy the 40" tv with cash instead of a 60" on credit or save up for it if that is what you want.

I own my cars because I saved for them, I don't owe anything on credit except my home and that is homestead and I plan to pay it off.

So tell me then, because I am not special, why can't others do that?
Isn't that what we are asking our government to do? But no, not us. Let us charge away and when our plan does not work out, by no fault of our own or may it was, bail us out. Isn't that what we don't want the government to do?

I think I do know what I am talking about, you just don't agree. Or at least my REAL WORLD and yours are different.

[Guest]

This is where either I failed to make my point or you don't know what you are talking about.

My point is, and your situation is what I am talking about, that you decided to buy lots of stuff. Maybe you needed it or thought you needed it. You borrowed money, used credit cards or what ever finacial device to get the money and the thing.
You then lost your ability to pay for it. Something many people either don't think about or plan for. It may not be your fault you lost your job but it is something one must think about. That is why I started my own business, I am last to go!
I do know what I am talking about because I came from dirt poor. Not just poor but "no shoes" poor. I have lost jobs and income. I also decided if I needed something I saved for it. I only use my credit cards for things that you have to have one one for like car rental and hotels, not to buy things with.

I bought only what I had money for not what I thought I deserved. Yeah, lots of people are hurting and it is not Obama that got us there. He just has not done anything to get us out.

But back to me not knowing what I am talking about.
So many people think you have to own a home or a new car or the latest smart phone, biggest TV and they go out and get it. It is so easy. Then when the fantacy world they live in crumbles it is the fault of the person who lent them the money or sold them the product on credit that is unfair.
Well I bet most people could not even tell you one thing on the credit card agreement forms or even mortgage papers. They just sign and hope!

I am sure you did all you could do after this happened to you. What I am saying is more could have been done before it happened, like don't buy on credit unless maybe a home and then only if you CAN AFFORD IT!

Drive a used car, use a phone that does not have the capability to fly the space shuttle, maybe buy the 40" tv with cash instead of a 60" on credit or save up for it if that is what you want.

I own my cars because I saved for them, I don't owe anything on credit except my home and that is homestead and I plan to pay it off.

So tell me then, because I am not special, why can't others do that?
Isn't that what we are asking our government to do? But no, not us. Let us charge away and when our plan does not work out, by no fault of our own or may it was, bail us out. Isn't that what we don't want the government to do?

I think I do know what I am talking about, you just don't agree. Or at least my REAL WORLD and yours are different.

Wow! Excellent and right on the money ! No pun intended.

[Guest]

notlongnow" You are spot on. My wife and i also started from humble beginnings. we have been together since age 13. We have always been fiscal conservatives. We avoided paying interest and so were slower than others to get some things. We never owned a new car until we were both working good jobs and then we drove them to the ground. We carried our lunches to work and put away as much money as we could. At age 46 I lost my job and was able to care for my family for a very long time until I gained employment. My goal was not to be forced to collect unemployment.

I have a silling and her husband earned more than my wife and i together yet they spent reckless and hence didn't save for a rainy day. Sad situation indeed.

So while I believe some hardship are not entirely a person's fault many are because of poor financial planning and all of us have a legal, moral social responsbility to accept the responsbility of our acts.

A European style welfare state is simply not acceptable nor is it beneficial to our democratic way of life.

[Guest]

I truly believe that until people realize that when they are buying on credit or borrowing money for a home, car or whatever, that it is a reflection of your character that you don't feel you need to repay it when things get bad and solving our problems will be hard to do until it is realized.

It is not just government that needs to cut back but we need to look at what we can AFFORD, not what we want.

I know some have been sucked in over the years to just borrow what you need but that was a choice not a right nor where they forced to do so.

I think the saying goes something like this,

Poor planning on your part,
does not constitute an emergency on my part.

Or something like that.

The problem is it has affected us all, even those who have made the right choices and avoided the credit trap.

If you want to fix things get rid of the credit reporting, the way it is now.

If you don't borrow you have no credit or bad credit. If you do borrow you have credit and have set yourself up for bad credit. Really a bad system.

[Guest]

if the government had to play by the same financial rules and obligations as we do there would be no problem because they would most certainly be deemed an unacceptable credit risk.

They would be cut off at the knees with the debt to income ratio.

I am an advocate of you spend what you can afford and that only. And if one cannot afford it they should be DENIED. Somehow, very many of us made to where we are today following those rules.

btk

[Guest]

notlongnow" You are spot on. My wife and i also started from humble beginnings. we have been together since age 13. We have always been fiscal conservatives. We avoided paying interest and so were slower than others to get some things. We never owned a new car until we were both working good jobs and then we drove them to the ground. We carried our lunches to work and put away as much money as we could. At age 46 I lost my job and was able to care for my family for a very long time until I gained employment. My goal was not to be forced to collect unemployment.

I have a silling and her husband earned more than my wife and i together yet they spent reckless and hence didn't save for a rainy day. Sad situation indeed.

So while I believe some hardship are not entirely a person's fault many are because of poor financial planning and all of us have a legal, moral social responsbility to accept the responsbility of our acts.

A European style welfare state is simply not acceptable nor is it beneficial to our democratic way of life.

BRAVO.....Well said!

[Guest]

This is where either I failed to make my point or you don't know what you are talking about.

My point is, and your situation is what I am talking about, that you decided to buy lots of stuff. Maybe you needed it or thought you needed it. You borrowed money, used credit cards or what ever finacial device to get the money and the thing.
You then lost your ability to pay for it. Something many people either don't think about or plan for. It may not be your fault you lost your job but it is something one must think about. That is why I started my own business, I am last to go!



WRONG!!!!

I PAID ALL MY BILLS AND IT WAS FRADULENT ACTIVITY WITH A BOGUS ENTRY IN MY CREDIT REPORT THAT CAUSED THE PROBLEM!

Tell the people who were illegally foreclosed upon that THEY don't need someone looking out for their interests.

THAT'S THE VERY PURPOSE OF GOVERNMENT - TO PROTECT IT'S CITIZENS FROM ILLEGAL ACTS!

And just to let you know..

I've lived in my house for 21 years. The only reason I'm mortgaged out at the moment is because of my divorce. Even so I managed to hang on to this house and continued paying the bills even when I'd lost contracts.

My car is 10 years old and runs like new. Yeah, I *do* have a new cell phone but part of THAT is because I'm saving $50/month on my new plan (3 lines with data).

I could have walked out on my obligations. According to the wording in my divorce decree, I could have taken the things I wanted out of the house and started anew. My house was in DEPLORABLE condition for reasons too numerous to go into here. Suffice to say that, if you've ever seen the show "Hoarders", I can tell you my house was about two stages away from being like that. To keep my house, I had to pay my ex a certain amount of money. I could have just walked away and let the place be sold for a pittance that would have probably barely covered the mortgage balance. My ex would have gotten nothing and I would be in pretty good shape.

What did I do? I went to work, in more ways than one. It was a point of pride with me to hang on to the house (I'd inherited it and it's problems from my adoptive mother). I managed to get some credit to start hiring some guys to get to things fixed (now that my ex was out of the way - shw wouldn't let people in the house). I fixed it up some, refinanced and fixed up more. One 2nd mortgage later, I had the money to pay her off.

During that process I worked to get a more secure job. Although I'd lost a contract in that time frame, I was unemployed for all of about 18 hours. I'm lucky enough to have the skills that can be in demand and I've worked hard enough to make them valuable.

Rather that go through the contract market again, I was looking for permanent employment. Yeah, if I was contracting again, I could be making more money - but the stress levels would be through the roof and the commute would be hellish compared to what I have now.

I'm making a little less - but enough to make progress on the bills that are outstanding. I just finished paying off the note on my car so that's one less payment. Sure the mortgages seem like they'll take forever but I know it's a matter of time.

And that's the thing I'm talking about. I knew the rules when I started into these loans. Fortunately my credit union has been fair with me. When the bogus stuff showed up on my credit record, they didn't hike my payments or call in my loan. I didn't have to fight like crazy to get things restored - and not everyone who tries manages to succeed like I did in getting things put back to normal. Later on, when the new credit card law passed, some companies hiked their interest rate on me. I called them asking if that was how they believed they should treat their best customers. Those that basically said "yes", well, my balances with them are ZERO. Those that were reasonable, I still do business with. I didn't even really complain when two of them cut my credit limits in half - I had no intention of ever borrowing THAT much money.

The things is, and I know this'll sound arrogant but I hope you'll take my meaning, not everyone is as smart as I am. Not everyone has my skills. And it's been myexperience that not every bank officer is on the up and up. Not every credit offer tells you the whole truth. In another case I dealt with, not every financing company even wants to abide by their own contracts (I was cancelling a club membership according to the terms of the contract and they kept refusing to do so and demanding more money).

THAT is why having an agency to protect consumers is needed.

I apologize for going on a bit too long..

[Guest]

WRONG!!!!

Not sure what I am wrong about?

I still think you misunderstand my intent and meaning.

First of all I always enjoy your thoughtful posts on here and look forward to reading them. I was not meaning to talk about YOU in particular. I have never been divorced so I have no experience in that area so I won't go there.
I never meant to imply that YOU did not pay your bills.

What I mean to say and seem to be very bad at it is.

Before all of this that has happened to you and others, choices were made that set you on this path. You did what lots of people did and it came back to bite you. Not saying it was your fault, it's just what people have been taught to do.

I have never got myself into this position because it just did not feel right. I would decide between baloney and bread or just bread. I made a decision to only buy what I could pay for so when it got bad, really bad, I lost nothing.

This is not how it happened for you.

IT WAS FRADULENT ACTIVITY WITH A BOGUS ENTRY IN MY CREDIT REPORT THAT CAUSED THE PROBLEM!

I don't think the government will stop this from happening.
With all the fraud in this government, we are going to put them in charge of stopping it, REALLY!

When it comes to illegally foreclosed homes, I am sorry for those people but more than half of them should have never been given a loan in the first place.
Again, the government forced these types of loans and now we need them to protect us????

I want to repeat, please don't take this as a personal attack on you, although I think you already have.
It was more a statement of were I think we are today and some people have protected themselves against these problems and some have not.

I need to add that bad things happen to good people but that does not mean that we ne a new agency to protect us from everything. Sometimes s#*T happens.

[Guest]

What I mean to say and seem to be very bad at it is.

Before all of this that has happened to you and others, choices were made that set you on this path. You did what lots of people did and it came back to bite you. Not saying it was your fault, it's just what people have been taught to do.



That makes a lot more sense.

But the fact is that enough people are being defrauded and there are enough market forces working against them that I think it's a perfectly reasonable idea to set up an agency who's purpose is to protect the PEOPLE instead of pandering to lobbyists.

It's a worse version of the old-time crooks who used to just send invoices to companies to see how many would pay just because they didn't check up on things and paid every bill they got. They were being defrauded.

When people are having their mortgages foreclosed or, worse yet, having banks foreclose on houses that have NO mortgages then, yes, that's what government is supposed to do - protect the people.

I agree a lot of people were never taught discipline and there are a lot of forces out there working against it. Heck, in my 20s I got into serious (for the time) debt trouble but I worked my way out of it. *That* was my education.


When it comes to illegally foreclosed homes, I am sorry for those people but more than half of them should have never been given a loan in the first place.
Again, the government forced these types of loans and now we need them to protect us????



I partially agree with you here. The banks had no business making some of those loans but I don't think the government is entirely to blame. Remember a bank's first loyalty is to it's SHAREHOLDERS and they were demanding higher and higher returns - so the banks went to riskier and riskier loans. People were raised believing that the bank could be trusted. The very process of *applying* for a loan meant you were asking them to 'bless' your situation. You went to an authority figure and depended on their discretion - after all THEY were the professionals.

If I go to a butcher and he gives me bad meat, am I the one at fault for getting sick? I know the metaphor doesn't hold 100% but I think you get my meaning.


I want to repeat, please don't take this as a personal attack on you, although I think you already have.
It was more a statement of were I think we are today and some people have protected themselves against these problems and some have not.


And I was a more than a bit animated in my response because of personal experiences.


I need to add that bad things happen to good people but that does not mean that we ne a new agency to protect us from everything. Sometimes s#*T happens.

And our government is supposed to be there punish the people who do those bad things.

It's like I've said a lot recently. If corporations are people, then why aren't their boards arrested when crimes are committed by them? They have all the benefits (free speech) without the responsibilities. They can do what they want and know that the worst that can happen to them is a fine -so they bake that into their risk calculations.

[Guest]

It's like I've said a lot recently. If corporations are people, then why aren't their boards arrested when crimes are committed by them? They have all the benefits (free speech) without the responsibilities. They can do what they want and know that the worst that can happen to them is a fine -so they bake that into their risk calculations

This is where someone or many on here might say I don't know what I am talking about but this is what I think about this.

I would imagine that corporations who give money to the politicians to get what they want have convinced congress to pass laws that protect the corporations in the same way as congress in protected from having to be bound by the same laws that "WE THE PEOPLE" are bound by.

I am sure that the legal eagles in the halls of "WE THE LOBBYIST" have help craft the rules for corporations to protect the source of their money.

But the fact is that enough people are being defrauded and there are enough market forces working against them that I think it's a perfectly reasonable idea to set up an agency who's purpose is to protect the PEOPLE instead of pandering to lobbyists

It sounds right but I have had it with government expanding. That seems to be all they know how to do. If they would just get out of the way in many areas, the economy would come back and the market would weed out many of these corporations.
As for many of the people that have been defrauded, I fear that this is just the first in a long life of them being suprised by life. I think they just don't and won't get it!

[Guest]

......The banks had no business making some of those loans but I don't think the government is entirely to blame. Remember a bank's first loyalty is to it's SHAREHOLDERS and they were demanding higher and higher returns - so the banks went to riskier and riskier loans.....


This part is all about government....oops....glad-hand members of Congress pressuring banks to make sloppy, risky loans to unqualified buyers, to appease those who used and misused the Community Reinvestment Act to buy votes.

"'These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

http://www.nytimes.com/2003/09/11/business/new-agency-proposed-to-oversee-freddie-mac-and-fannie-mae.html?pagewanted=all&src=pm

And a closer look at the Community Reinvestment Act:

"Shortly afterward, Fannie Mae and Freddie Mac addressed bank fears that the low-income lending with relaxed standards would unduly increase risk by beginning to securitize “affordable” mortgages. This was the beginning of subprime lending. It was the “pull” factor that complimented the “push” factor of the CRA.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which opened the door for interstate banking and encouraged a new wave of banking M&A, made the ratings under the CRA a test for determining whether acquisitions would be allowed. That same year, the Fed refused to allow a Hartford, Connecticut bank to acquire a New Hampshire bank on fair housing and CRA grounds.

This was the first time the Fed had ever taken this kind of action, and it had profound effects through the banking sector. It sent a strong signal to the banks that the Fed would closely scrutinize lending practice, limiting the ability of banks to grow or make acquisitions if they were found to have insufficient low income or minority lending. Banks immediately responded by lowering down payment requirements and using more flexible income criteria......"

Read more: http://www.businessinsider.com/the-phony-time-gap-alibi-for-the-community-reinvestment-act-2009-6#ixzz1jpQCTWnZ

[Guest]

That's why I said not *entirely* to blame. There *is* blame there, but there's more than enough to go around.