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Dear ,
The Circle of Sentiment
How many of you remember the Lion King movie from Disney. It talked about the Circle of Life. Well today I'm going to talk about the Circle of Sentiment within our economy. To make my point I am going to use this article about Dick Bove, banking analyst for Rochdale Securites.
Bove: To Fire Up Growth, Scrap Excessive Bank Rules
"Excessive bank rules". Let's take a look back in time. For years and years many felt we were weakening our bank rules. Banks were allowed to leverage their businesses more and more. In the late 90's rules were eliminated so that retail banks and investment banks could combine. Credit requirements were loosened to the point that we had things called No Doc mortgages or Liars Loans, where very minimal documentation was needed.
As a result you had the first half of the circle. What were the results? Undercapitalized banks whose loan portfolios were weakened by their Sub Prime holdings. Sub Prime being lower credit quality loans that had a much higher likelihood of defaulting. Then when the economy headed south in 08-09, people couldn't make their mortgage payments and the whole thing fell apart.
So then the second half of the circle began. The tightening of banking regulations. What were those idiot bankers thinking giving loans to people that probably couldn't pay them back? From now on only give loans to people that qualify and can afford them. (This means less loans will be made because fewer people will qualify) Raise more capital and strengthen reserves. (This also will mean fewer loans being made because the banks will have less money to lend) The government will raise fees on the banks for the additional oversight. (And this also will mean less money available to be loaned out)
The result of the tightened regulations seems to be a long term weak economy. So now we are starting to see calls for less regulation in the banking industry. Less restrictions so they can loan more money. That's the ticket! That'll get the economy going. Does that seem like a good idea to you?
In the World of Make Believe
This next article is what I consider to be a great example of why so many people now days are a bit contemptuous of our government.
 | | (Click to read article) |
The EPA actually has a rule that requires oil refiners to add a substance that doesn't even exist in the marketplace. And then they are fining the refiners millions of dollars for not including the product that doesn't exist. Does that seem fair to you? Here are a couple of quotes from the article.
"Refiners are at their wit's end because the government set out requirements to blend cellulosic ethanol back in 2005, assuming that someone would make it. Seven years later, no one has."
"And Charles Drevna adds, "forcing us to use a product that doesn't exist, they might as well tell us to use unicorns.""
And what is the government's response? Take a look.
""We are going to reduce your blending obligation by 98 percent because we feel that that's the right thing to do," says Brooke Coleman, the executive director of the Advanced Ethanol Council of the Renewable Fuels Association. "We are going to maintain your blending obligation on the gallons that we think are going to emerge.""
So let me get this straight. In 2005 the government put forth this rule, knowing that the product didn't exist, but they assumed someone would make it. Now 7 years later, even though no one is making the product yet, the government still going to fine you on a reduced amount based on the amount of a non existent product that they think will emerge, even though none has emerged in the last 7 years. Incredible!
Want To Have Some Fun?
I try to stay as non political as possible in this update. But I would hope that those of us on the right and those of us on the left could all agree that this is simply ridiculous and unfair. If that is true then let's see if we can get an explanation from our government. Our Congressman, Fred Upton, is the Chairman of the House on Energy and Commerce. I bet he would be a good place to start.
Print out the article and mail it to his office with a respectful letter asking for an explanation as to how it is even in the realm of fairness for the government to fine a company for not including a substance in their product that doesn't even exist? Then let's compare answers. Please let me know if you hear back from his office and what the explanation is. Thanks!
Until next week , Protect Your Wealth!
Sincerely,
  
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